JAKARTA - The global geopolitical dynamics that drive the rise in world energy prices are considered to place many countries, including Indonesia, in a major challenge to maintain a balance between affordability of energy prices, supply certainty, and the sustainability of the national energy sector.
Economist Josua Pardede said the concerns of manufacturing industry players regarding the increase in gas prices and supply uncertainty were reasonable because energy, especially natural gas, was one of the main factors driving the national industrial sector.
"In my opinion, this situation needs to be read as a very real energy policy dilemma, because natural gas is not only a commodity but also an industrial production fuel," he told reporters, quoted on Thursday, June 4.
Data from the Ministry of Energy and Mineral Resources shows that the majority of Indonesia's natural gas utilization is for domestic use, used for almost all industrial sectors.
"This explains why the issue of LNG and natural gas prices cannot be seen only as an energy provider issue, but also as a national industry issue and economic stability," he said.
Even so, Josua who is the Head of Economist at Bank Permata explained that the situation needs to be seen in its entirety because this geopolitical impact creates almost all countries facing pressure from rising energy costs and competition for securing the world's energy supply.
The situation also occurred in various Asian countries which are now increasingly active in securing LNG to maintain domestic energy needs and the sustainability of their industries. Referring to PetroVietnam and IEEFA 2026 data, gas prices in Vietnam which are now increasingly dependent on LNG have reached around USD27.81 per MMBtu. In the Philippines, based on S&P Global and Shell FGEN 2026 data, LNG prices have also reached around USD28.50 per MMBtu.
Meanwhile, Singapore as a regional LNG hub recorded higher prices, namely around USD40.12 per MMBtu for the industrial bulk sector and around USD47.54 per MMBtu for the general retail sector.
"Difficult choice situations such as in the Philippines and Vietnam are also becoming relevant for Indonesia, especially for LNG-based supplies that do not receive direct subsidies. On the one hand, keeping gas prices too low helps the industry survive and maintain purchasing power, but on the other hand, if selling prices are forced too low, energy providers bear losses, supply is at risk of being disrupted, and energy investment becomes less attractive," Josua explained.
In Indonesia itself, the domestic LNG price after adjustment is estimated to be in the range of USD21-USD25 per MMBtu so that it is still relatively more competitive compared to a number of regional countries and certain alternative energies.
Josua explained that the biggest risk if subsidized LNG is still forced to be sold without price adjustments is the emergence of pressure on energy providers which could have an impact on energy availability. In fact, in situations like this, the most important thing is the availability and certainty of energy supply rather than cheap prices.
"The certainty of supply can weaken (if there is no price adjustment) because energy providers will be more careful to take long-term contracts or buy additional supplies that refer to the global market. Then, upstream investment in oil and gas can be held back because investors see domestic prices do not reflect the economics of the project," he said.
If upstream investment weakens, he said, Indonesia could become more dependent on energy imports, including LNG.
"And it is even more vulnerable to global price fluctuations," he added.
Then Josua suggested that when global LNG prices soar, the price increase to the industry is carried out gradually. Conversely, if global prices fall, the benefits of the decline must also be passed on to the industry.
"The middle way is a gradual price adjustment, targeted assistance, longer supply contracts, energy efficiency in industry, acceleration of domestic gas production, and certainty of upstream oil and gas investment. With this approach, Indonesia can keep the industry alive without damaging the foundation of long-term energy resilience," he suggested.
In terms of business structure, the price of LNG in the upstream sector is indeed different from the downstream sector. LNG prices in the upstream will adjust to market mechanisms, where the price index applies globally. Prices can be very volatile as is currently the case due to geopolitical conditions in the Middle East.
Meanwhile, the determination of prices downstream has taken into account the price of gas upstream and various cost instruments from existing supply chains. In Indonesia, downstream gas prices include regasification, transportation, trading and pipeline costs. All cost instruments applicable to business actors in the natural gas sector are set by the government.
Professor and Director of the Center for Economic Policy Research, Faculty of Economics and Business, Universitas Brawijaya (PPKE FEB UB) Prof. Candra Fajri Ananda said that adjusting energy prices, especially LNG, which is increasingly needed, is something that needs to be done. In the energy sector, he continued, prices must be able to cover production costs.
"In a situation like this, the most important thing is energy availability. Not price. Now what the government needs to do is ensure that energy will not be scarce," he said.
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