UPI Expert Says Pertamax Increase is Rational but Subsidies Must Be Protected

BANDUNG - Professor of Microeconomics at the University of Education Indonesia (UPI) Prof. Dr. Eeng Ahman assessed that the adjustment of the non-subsidized BBM prices of Pertamax and Pertamax Green is a rational corporate step in the midst of the global economic shock.

However, the government is urged to continue to tighten protection against quotas and stability of subsidized fuel prices such as Pertalite and Biosolar as a cushion for the purchasing power of vulnerable people.

"In economic theory, when a commodity becomes scarcer or the cost of obtaining it increases, the price tends to rise. Likewise for imported goods, the weakening of the domestic currency will increase the cost of procurement," said Eeng when contacted from Bandung, Saturday.

Eeng explained, the combination of a spike in world crude oil prices due to the escalation of geopolitics in the Middle East and the weakening of the rupiah exchange rate automatically affects the cost structure of imported energy at the upstream level.

As an entity that operates in the market mechanism, Pertamina is considered to have to make decisions on price adjustments in order to maintain business sustainability and avoid the risk of large losses.

However, the multiplier effect on the MSME, transportation, and culinary sectors must still be mitigated through mass consumption efficiency.

"In the short term, the most realistic is to encourage the efficient use of fuel, both by the public, business actors, and the government," he said.

Furthermore, he reminded the government not to interfere with the existence of subsidized fuel in the near future.

This is because the current energy sector subsidy instrument is the only protector of the productivity of micro-businesses so as not to trigger wider food inflation.

To break the chronic dependence on international price fluctuations, Eeng encourages the government to take extreme steps by accelerating the energy self-sufficiency agenda through the expansion of domestic refineries.

"In the long term, the government must strengthen national energy resilience through increasing domestic energy production capacity and efforts to achieve energy self-sufficiency," said Eeng.

According to him, independence in the energy and food sectors will be the main foundation for the national economy to be more immune from future global uncertainties.