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Fuel Price Adjustment Is the Right Decision


By: Rifki Maulana )*

The adjustment of the price of BBM (fuel oil) has become a matter that has been widely discussed by various groups, all the pros and cons also emerged from many parties. This step is something that must be taken, especially since the world oil price has also increased, so that the effort to adjust the price of fuel is the right decision.

It was recorded that on September 3, 2022, the President of the Republic of Indonesia, Joko Widodo, decided to adjust the fuel price due to rising world oil prices which resulted in swelling of fuel subsidies.

            Jokowi admitted that he wanted domestic fuel to remain affordable by providing subsidies. However, this desire cannot be realized, because the budget for subsidies and fuel compensation in 2022 has increased from Rp 152.5 trillion to Rp 502.4 trillion.

Of course, the government has carried out various calculations carefully, including calculating the risks and impacts that may occur on the community.

            The fuel price adjustment is due to the price of crude oil which often fluctuates, but in Indonesia, currently the price is still high. This is based on Pertamina’s records which show that the average ICP price as of July 2022 is in the range of 106.73 dollars per barrel or 24 percent higher than in January 2022.

            On the other hand, almost more than 50% of the world’s oil supply is in the Middle East and is centered in 5 countries, namely Saudi Arabia, United Arab Emirates, Iraq, Kuwait and Qatar.

            As is known, these countries tend to have high geopolitical tensions, thus making the market worried that the supply of oil will decrease. As a result, global oil prices tend to increase.

            Besides being influenced by external factors, the fuel price adjustment was also caused by internal factors. Where the government has to pay up to Rp 502 trillion to provide fuel subsidies and energy compensation for the community.

            Meanwhile Hasto Kristiyanto as Secretary General of the PDI-P (PDIP) believes that the government’s plan to adjust fuel prices is the best decision. He admitted that PDIP had also tried to provide various inputs for Jokowi’s consideration.

            Hasto said that an important step taken by the government is to prepare a social safety net to overcome these impacts. It is intended that in the midst of inflationary pressures that have an impact on poverty, unemployment can be suppressed by various stimuli carried out.

            Furthermore, PDIP also understands that the Government’s decision is the impact of the burden borne by the government due to fuel subsidies. He also emphasized, who would have thought that there would be a war between Russia and Ukraine. Where it also affects the price of fuel in almost all countries in the world.

            Meanwhile, the Special Staff (Staffsus) of the Minister of Finance for Strategic Communication, Yustius Prastowo, stated that this year’s state budget (APBN) was actually sufficient to finance fuel subsidies and energy compensation until December 2022.

            However, Prastowo said that this was accompanied by terms and conditions. One of them is if the world’s crude oil prices, whose movements are very volatile, can stay in a range not too far from 100 US Dollars per barrel. Because this figure has become the benchmark price for Indonesian crude oil or ICP in the 2022 State Budget.

            Thus, when the oil price breaks above the level of 100 US Dollars per barrel as stated in the revised 2022 State Budget, the ability of the State Budget to pay subsidies and energy compensation will be disrupted.

            Prastowo said that the fixed benchmark of 100 US Dollars was the basis for calculating the subsidy. If the subsidy is already too high, of course it will be recalculated because the subsidy will definitely swell, that is the basis for the calculation.

            In addition to the question of price, Prastowo also said that quotas are one of the factors that affect the government’s ability to meet the subsidy budget. Moreover, the quota cannot keep up with the level of public consumption after the Covid-19 pandemic.

            On the previous occasion, the Minister of Finance of the Republic of Indonesia Sri Mulyani Indrawati also reminded that subsidies and compensation for fuel oil could reach more than Rp. 698 trillion by the end of 2022.

            This amount exceeds the quota set out in the revised 2022 state revenue and expenditure budget of Rp 502.4 trillion. This is due to the upward trend in world oil prices, the weakening of the rupiah exchange rate and the consumption of pertalite and diesel.

            The current level of fuel consumption has also exceeded assumptions so that the fuel subsidy budget is drained. Sri Mulyani explained that when the government budgeted a fuel subsidy of Rp 502 trillion, there was a determination of the volume of fuel that would receive the subsidy.

            In addition to making price adjustments, Sri Mulyani also said regarding the transfer of fuel subsidies which had just been set at Rp 24.7 trillion, the policy was aimed at reducing pressure on the community amid rising goods prices and also reducing poverty.

            Sri Mulyani also mentioned that President Jokowi had given an order to provide social assistance amounting to Rp. 24.17 trillion from the transfer of the fuel subsidy that could be distributed this week to the public.

            Preparations related to the social safety net show that the government’s policy regarding fuel price adjustments is the right thing, so it is hoped that the community will be helped and not burdened by the fuel price adjustment.

)* The author is a contributor to Pertiwi Institute

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