CELIOS Economist Warns Oil Prices Will Reach 120 USD: State Budget Burden in 2026 Could Increase to Rp515 Trillion

JAKARTA - The increasingly heated geopolitical tensions in the Middle East have sparked serious concerns about national economic stability. Executive Director of the Center of Economic and Law Studies (CELIOS), Bhima Yudhistira, projects that the world crude oil price has the potential to soar to the range of 100-120 USD per barrel.

This sharp increase was triggered by disruptions in the Strait of Hormuz, a vital route that supplies about 20% of the world's oil needs. The situation is exacerbated by the rejection of insurance applications for logistics vessels in conflict areas, which hinders the global oil import process.

"Double Burden" threat to the 2026 State Budget

As a net importer of oil, Indonesia faces a very large fiscal risk. Bhima explained that every increase in oil prices by 1 USD per barrel above the state budget assumption will increase the state's spending by around Rp. 10.3 trillion.

"If the price of oil reaches 100 to 120 USD, then the state's spending in 2026 has the potential to swell to Rp515 trillion," Bhima said in a statement to VOI, Sunday (1/3/2026).

According to him, this burden does not only come from fuel subsidies, but also includes compensation to Pertamina and electricity subsidies. "There is a double burden directly on our state budget," he said.

Domino Effect: Weakening of the Rupiah and Food Inflation

In addition to fiscal pressure, Bhima highlighted the flight to quality phenomenon, where investors tend to withdraw capital to safer assets, thus triggering a weakening of the rupiah exchange rate.

The food sector is one of the most vulnerable to be affected. Commodities that depend on imports and exchange rate fluctuations, such as soybeans, wheat, and meat, are predicted to experience price increases.

"Imported inflation (inflation from imported goods) both from energy and food will create a downward spiral that will drastically suppress people's purchasing power," explained Bhima.

Bhima warned that if this conflict continues to spread and last long, the impact will not only be felt by Indonesia. Many developing countries are at risk of falling into a deeper economic crisis due to supply chain disruptions and uncontrollable living costs.