Energy subsidies increase as global oil prices soar

Workers delivering LPG gas cylinders into the truck for customers in Surabaya, Indonesia on February 25, 2022 (Shutterstock.com)

JAKARTA – Increasing global oil prices have made the price of Indonesian crude oil or Indonesian Crude Price (ICP) also shot up. Temporary monitoring of ICP as of February 24, 2022, was recorded at USD 95.45/barrel.

Ministry of Energy and Mineral Resources spokesman Agung Pribadi said that the price of Brent oil has reached more than USD 100/barrel. The increase in world oil prices will also affect the state budget, as energy subsidies are expected to swell.

“Since the ICP rose above USD63/barrel (assuming the 2022 state budget), we continue to monitor and anticipate the impact. Not only the price of oil, but also the price of LPG like CP Aramco,” Pribadi said in a written release, Monday (28/2).

Furthermore, he said that the increase in ICP causes the economic price of fuel to increase, thereby increasing the burden of subsidies for fuel, LPG and biofuel compensation in the state budget. The reason is, every USD 1 increase in oil per barrel has an impact on an increase in LPG subsidies of around IDR 1.47 trillion, kerosene subsidies of IDR 49 billion and fuel compensation costs of more than IDR 2.65 trillion.

In addition, the increase in ICP also has an impact on electricity subsidies and compensation, considering that there is still the use of fuel in power plants. Every increase in ICP by USD1/barrel, has an impact on additional subsidies and electricity compensation of IDR 295 billion. The subsidies for fossil fuel and 3-kg LPG canisters in the 2022 State Budget are IDR 77 trillion.

In addition to the impact on the state budget, the increase in oil prices will also have an impact on other sectors, especially transportation and industries that consume non-subsidized fuel.

“The trend of rising world oil prices has raised the economic price of fuel,” Pribadi added.

As a comparison, the range of non-subsidized fuel prices in several ASEAN countries, including Singapore are IDR 28,500/liter, Thailand IDR 19,300/liter, Laos IDR 19,200/liter, Philippines IDR 18,500/liter, Vietnam IDR 16,800/liter, Cambodia IDR 16,500/liter and Myanmar IDR 15,300/liter. (Hartatik)

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