Perta-hike! President Joko Widodo raises fuel prices

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The day Indonesians have been dreading for weeks has come, as President Joko Widodo announced today hikes to fuel prices in the country.

Related — ‘Still calculating’: President Jokowi denies Sept. 1 fuel price hike was ever actually a thing

After the nation went into panic buying mode ahead of an anticipated fuel price hike on Sept. 1, which did not materialize, the president today dropped the bombshell that the government has indeed decided to raise fuel prices amid a global energy crisis.

“This is the government’s last resort, namely reallocating subsidies for fuel,” Jokowi said in a press conference today.

Effective 2:30pm today, the 90 octane-rated subsidized fuel Pertalite — the most popular fuel variant produced by state-owned oil and gas firm Pertamina — will be sold at IDR10,000 (US$0.67) per liter, up from IDR7,650 (US$0.51). The subsidized diesel fuel Solar, which previously costs IDR5,150 (US$0.35) per liter, will now cost IDR6,800 (US$0.46) per liter.

In addition, the price for the non-subsidized 92 octane-rated fuel Pertamax has also been raised from IDR12,000 (US$0.81) to IDR14,500 (US$0.97) per liter.

Jokowi had been keen to stress that the government was going to be careful about raising fuel prices despite an apparent economic necessity to do so. His previous reluctance to hastily introduce the hike was predicated on fears that such a measure could lead to unchecked inflation and hamper economic growth.

Yet growing demand for fuel subsidy had syphoned an increasing amount of funds from the state budget. For 2022, the Indonesian government has so far earmarked IDR502 trillion (US$33.7 billion) for energy subsidies, up from the IDR170 trillion (US$11.4 billion) it allocated at the start of the year.

One likely explanation for the ballooning demand is that fuel subsidies have continued to go towards those who aren’t actually entitled to receive them. The subsidy for Pertalite, for example, ostensibly targets low cost vehicles and motorcycles, but the fuel has also been popular for higher-end vehicles. 

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