Beware, Don't Be Great at the Beginning But Be Broken at the End!

Photo by Luthfiah VOI

JAKARTA - The slogan "Great Indonesia" was once chanted by the Joko Widodo government a decade ago. Now, the Prabowo Subianto government seems to intend to implement the slogan at a time when a global energy crisis occurs due to the war between the United States-Israel and Iran.

How great, when other countries, especially in the Southeast Asian region, are in a state of collapse and are almost paralyzed due to the fuel crisis, Indonesia is standing firm as if it did not feel the impact of the heating up of the situation in the Middle East and the soaring world oil prices.

In fact, this republic is the only country in the Southeast Asian region that is unwavering and (at least until now) able to keep the price of both subsidized and non-subsidized fuel stable, alias not experiencing an increase.

As we know, Iran's blockade of the Strait of Hormuz has shaken the global energy distribution system. Because, the narrow path that flows around 20 percent of the world's oil and liquefied natural gas is a crucial point for the region that absorbs more than 80 percent of its supplies. The impact is significant and fast, namely the scarcity of fuel, export restrictions, to heavy pressure on the state budget. As a result, a number of countries have taken extreme steps to maintain energy stability. They began to count on taking efficiency measures.

What about Indonesia? Indonesia is not immune to the effects of the Iran vs. US-Israel war. The reason is that although it has other supply sources (about 82 percent of crude oil imports) from other countries that are relatively not directly affected by the conflict, about 18.1 percent of Indonesia's crude oil imports come from Saudi Arabia where the distribution line passes through the Strait of Hormuz, an area now affected by the conflict. This is what makes the government take a different policy from other countries when crude oil prices soar.

Yes, the Prabowo Subianto government chose to keep domestic fuel prices at the same level rather than handing them over to market prices. This policy is certainly good news and is the right step to curb inflation while maintaining people's purchasing power. Unpad energy observer Yayan Satyakti assessed that the decision not to raise fuel prices showed the government's concern for the condition of the community, which is facing a decline in purchasing power in a challenging economic situation.

According to him, this policy will maintain macroeconomic stability, especially in holding the inflation rate while dampening economic turmoil which is influenced by the increase in the price of imported goods due to the increase in global logistics costs.

"This affirmative step by the government should be appreciated because it provides room for stabilizing the national economy, as well as being a cushion for the community until the ongoing global energy crisis can end soon," said Yayan.

However, this policy eventually forced the government to recalculate the finances that had previously been allocated. Every gap is closed, every potential is dug up, in order to keep the fiscal breath long in the midst of a suffocating pressure that has not subsided. A number of shopping posts have been reviewed, budget efficiency has been tightened, and state revenue sources have been pushed more optimally.

The government also implemented a policy of working from home or Work from Home (WFH) for State Civil Servants (ASN) every Friday. The goal is to reduce national fuel consumption and encourage the digitization of public services.

Government Must Strengthen Commodity-Based Revenue

Syafruddin Karimi, an economic observer at Andalas University, revealed that in addition to budget efficiency, the most reasonable dominant strategy is to control the volume of subsidies, maintain the exchange rate, and reduce dependence on imported energy. "The government has moved in this direction through restrictions on the sale of fuel, securing LPG supplies, and accelerating B50 to reduce fossil fuel consumption," he added.

He said the decision was very important, because fiscal pressure not only came from high oil prices, but also from a weak exchange rate. Moreover, the energy subsidy budget for 2026 of Rp381.3 trillion was compiled on the assumption of US$70 per barrel of oil and a rate of Rp16,500 per US dollar. However, oil prices have moved above US$100 and the rupiah is in the range of Rp16,990.

This situation makes the government have to hold the fiscal not only from the spending side, but also from the energy design side, stricter quotas, supply diversification, consumption savings, and energy import substitution. "The logic is simple. When energy is expensive, the state must capture a portion of the rent from the sector that is still benefiting, especially commodities such as palm oil, minerals, and metals that continue to support exports," said Syafruddin.

He added, based on data from the Central Statistics Agency (BPS), the largest export increase in January-February 2026 came from animal/vegetable fats and oils of US$1.46 billion and nickel and goods of 55.97 percent. This means that there is still room to strengthen commodity-based receipts without directly hitting household consumption. At the same time, the government can also optimize revenue from increasing imports, because the value of imports in January-February 2026 increased by 14.44 percent to US$42.09 billion. "So, the most realistic short-term revenue strategy is not to attract a broad new tax, but to capture revenue from sectors that still have price and volume cushions," he said.

The question is, can Prabowo Subianto's government policies make the state budget hold back the rise in domestic fuel prices? Moreover, even though signs of conflict in the Middle East will end soon after Donald Trump said the US victory was in sight, oil prices do not necessarily immediately fall to the ideal price.

The recovery of global energy production is estimated to take time even if the conflict in the Middle East ends. Although the conflict ended quickly, the process of returning to normal production levels will not take place instantly because it takes time to restore production capacity and reactivate the entire energy supply chain.

Policy and Program Director of the Prasasti Center for Policy Studies, Piter Abdullah predicts that the price of fuel in Indonesia will not last long. Because, if the world oil price continues to rise until the end of the year, the government will find it increasingly difficult to keep the price stable.

"If the increase in oil prices lasts until the end of the year, it will be increasingly difficult to hold down the price of fuel prices from rising. Therefore, the public and business actors need to understand that adjusting energy prices in certain conditions is part of a reasonable policy response, as long as it is followed by appropriate compensation," he said.

Former Deputy Governor of Bank Indonesia, Halim Alamsyah added, if the world oil price continues to rise, it will affect Indonesia's economic growth which is declining below 5 percent. "In the scenario of high oil prices that are prolonged, Indonesia's economic growth also has the potential to slow down. We estimate that economic growth could fall to the range of 4.7-4.9 percent, below the average growth of around 5 percent in recent years," he added.

Fuel Price Adjustment as a Mitigation Measure

Concerns about the heavy burden on the state budget in holding down fuel prices have prompted the Deputy Chairman of Commission VII of the Indonesian House of Representatives, Lamhot Sinaga, to encourage the government to consider price adjustments as a mitigation measure. This is because the fiscal condition in the future requires adaptive steps to maintain the stability of the state budget.

"When the world oil price jumped to 140 US dollars per barrel, while the assumptions in the state budget were only 70 US dollars, the pressure on the fiscal was very large. This is not a normal situation, but an emergency condition that requires a quick and measured response," he said.

He explained that the surge in global oil prices, which is twice as high as the Indonesian Crude Price (ICP) assumption in the 2026 State Budget, has the potential to significantly burden the budget. The reason is that every increase of 1 US dollar per barrel can add to the state budget burden of up to Rp. 6 trillion so that a surge of up to 70 US dollars has the potential to increase pressure to hundreds of trillion rupiah.

In this condition, the adjustment of fuel prices needs to be understood as a strategic policy, not just a price increase. "The adjustment of fuel prices if carried out by the government is part of an effort to support the increasingly heavy burden on the state budget. This is not a populist policy, but a realistic policy to maintain the fiscal stability of the country. Without adjustment, the burden of energy subsidies and compensation has the potential to increase sharply and weaken the fiscal resilience of the country," continued Lamhot.

Public Policy Researcher from the Institute for Development of Policy and Local Partnerships (IDP-LP), Riko Noviantoro, hopes that the government will be able to optimize revenue sources in the midst of a crisis, including closing the budget leakage gap that often occurs. He said, with improvements and optimization of state revenue sources, the government could have adequate fiscal space in the midst of the burden of the state budget.

"In my opinion, the patchwork strategy of the state budget is an inevitable choice. But, the government must also move quickly, close the leakages, while ensuring that the economic foundation does not collapse due to energy turmoil and global uncertainty," said Riko.