Increased Subsidy Fuel Prices Should Be Postponed Because World Oil Prices Are Down

People lined up at the Krapyak gas station, Kudus, Central Java on August 31, 2022 due to the issue of an increase in the price of subsidized bbm on September 1, 2022. (Antara/Yusuf Nugroho)

JAKARTA - The news of the increase in the price of Pertalite and Solar fuel as of September 1, 2022, which has widely circulated in the past week, has not been proven. What happened was the decrease in the price of a number of non-subsidized fuel commodities (BBM).

In fact, not even a month old, the price of non-subsidized fuel has been increased. On August 3, 2022, Pertamina set the prices for Pertamax Turbo, Dexlite, and Pertamina Dex in Jakarta to:

As of September 1, 2022, prices changed again:

"PT Pertamina (Persero) has adjusted the price of general fuel oil (BBM) to implement the Decree of the Minister (Kepmen) of Energy and Mineral Resources No. 62 K/12/MEM/2020 concerning Formula of Basic Prices in Calculation of Retail Selling Types of General Oil Fuel Types of Gasoline and Solar Oil Disbursed Through Public Fuel Filling Stations," wrote Pertamina's official website, Thursday (1/9).

Meanwhile, for the increase in the price of Pertalite and Solar fuel, the government has not been able to decide.

All BBMs are still in the process of calculating, calculated carefully. Counted with caution," President Jokowi told reporters on the sidelines of his working visit to Papua, Thursday (1/9).

Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira assessed that non-subsidized fuel prices tend to fluctuate following the world crude oil prices. So, it is natural to experience an increase or decrease in the near future.

Even so, Bhima hopes that the price can go down even more. Thus, the disparity in subsidized and non-subsidized fuel prices is not too wide.

If the disparity price is too wide, surely people will shift from subsidy to non-subsidized. That can make the fuel quota insufficient or run out quickly," Bhima told VOI, Thursday (1/9).

According to Bhima, the world's crude oil prices have now begun to decline. In fact, many people think that the decline will continue. So, it's a good idea, the government's plan to increase the price of subsidized fuel has been postponed. Meanwhile, the government further emphasizes the mechanism for the increase.

If the price of subsidized fuel increases, what are the consequences? What kind of social assistance? Government communication is not clear. Meanwhile, we know that the current condition of the people's life burden is getting heavier, starting from the pandemic, food inflation which was double digits until July 2022. In August, food inflation was still above 8 percent," said Bhima.

Meanwhile, core inflation, which reflects the demand side, is still small, at around 3 percent.

"This means that if the fuel is actually increased, the public will see, how come the additional social assistance is only Rp. 24 trillion, it will not be enough. Instead, it makes the inflation rate increase," he added.

So, said Bhima, there must be firmness. Don't let all ministers talk to the public about the increase in subsidized fuel prices. Just the Minister of Energy or the Minister of Finance said. "Right now, the Minister of Investment is talking, the Coordinating Minister for Maritime Affairs and Fisheries is talking, this is what makes people more worried."

Look at the gas stations ahead of September 1, 2022, almost all of them were in line. As if there was a panic buying. This is because the news regarding the increase in pertalite and diesel on September 1 is quite widely available.

"It's not impossible, this condition is used by the hoarding business. The leak there was not leaked to buyers who were not right on target or capable people. But it leaked to the hoarder or speculator who took advantage of the situation. It's hard to Pertamina, in the end it was difficult to go to the state budget because the policy is not clear," he said.

Head of the Central Statistics Agency, Margo Yuwono, asked the government to be careful in deciding on the increase in Pertalite and Solar fuel prices. Do not let inflation soar so that household consumption erodes.

"Our economic growth of 56 percent was contributed by household consumption. If high inflation then erodes household consumption, the big impact is on economic growth," he said at the Regional Inflation Coordination Meeting on August 30, 2022.

Look at the increase in fuel prices in 2005, 2013, and 2014. In March 2005, the price of premium gasoline fuel rose 32.6 percent and diesel 27.3 percent. Then, in October the same year the price of gasoline rose 87.5 percent and diesel 104.8 percent. As a result, inflation broke to the level of 17.11 percent at that time.

Then in 2013, gasoline rose 44.4 percent and diesel 22.2 percent. The inflation rate only reached 8.38 percent

Likewise, in November 2014, gasoline rose 30.8 percent and diesel was 36.4 percent. However, the inflation rate is only 8.36 percent.

"Why in 2013 and 2014 inflation could be lower than in 2005, because the social assistance policy is good, so the impact of inflation can be suppressed," said Margo.

Launching from Bank Indonesia, inflation can be interpreted as an increase in the price of goods and services in general and continuously within a certain period of time. The price increase from one or two items alone cannot be called inflation unless the increase expands (or results in price increases) in other goods.

Low and stable inflation is a prerequisite for sustainable economic growth which ultimately provides benefits for improving people's welfare. The importance of controlling inflation is based on the consideration that high and unstable inflation has a negative impact on people's socio-economic conditions.

The increase in inflation must be watched out for in the future. Especially with the issue of increasing fuel prices and household fuel. The increase in fuel prices will certainly increase the price of other commodities. This is what will then encourage an increase in general inflation," concluded Margo in a press release, Thursday (1/9).