Global oil prices rise, what are the implications for Indonesia?
Jakarta (ANTARA) - Global oil prices moved upwards again at the end of August 2rol6 amidst geopolitical tensions and risks of global supply disruptions. This situation is a point of concern for Indonesia, as fluctuations in oil prices can affect energy costs, fuel prices, inflation, and the national budget.
Brent crude oil prices were recorded at approximately US$90.41 per barrel on Monday (31/8/2026). This price increase occurred as the market continues to monitor supply risks resulting from conflicts and disruptions to global oil trade routes.
Why are global oil prices rising?
One of the primary factors is the increasing risk to the global oil supply due to geopolitical conflicts. Uncertainty in the Middle East, including disruptions to ship traffic through the Strait of Hormuz, has led the market to factor in the possibility of reduced oil supplies to the global market.
In addition to supply factors, global demand developments are also a concern. Reuters noted that global oil demand in 2026 is expected to decrease by approximately 1 million to 1.6 million barrels per day, primarily due to weakening oil imports from China. However, the risk of supply disruptions continues to exert upward pressure on prices.
Will Indonesian fuel prices automatically rise?
An increase in global oil prices does not automatically result in an immediate rise in all fuel prices in Indonesia.
Non-subsidised fuel prices, such as Pertamax, are influenced by global crude oil prices and other indicators. Pertamina previously stated that it continues to closely monitor global oil price developments as one of the considerations in determining non-sublagised fuel prices.
The Ministry of Energy and Mineral Resources (ESDM) also calculates the economic viability of Pertamax by considering the basic cost of provision and other components amidst fluctuations in global oil prices.
This means that changes in global oil prices may exert pressure on non-subsidised fuel prices, but the decision to adjust prices remains dependent on government policy and business entities.
For subsidised fuel, the mechanism is different. The government previously ensured that subsidised fuel prices would be maintained despite global oil price volatility. Finance Minister Purbaya Yudhi Sadewa also stated that the price of Pertalite would not be increased even if Brent crude oil prices returned to around US$100 per barrel.
Consequently, the impact of rising global oil prices is felt more quickly in the non-subsidised fuel sector compared to fuel prices regulated by the government.
Impact on energy costs
If global oil prices remain high, the costs of procuring oil and fuel products may also increase. For a country that still imports a portion of its oil and fuel needs, such conditions can increase pressure on energy costs.
Indonesia uses the Indonesian Crude Price (ICP) as an important indicator in oil and gas sector policy. The July 2026 ICP was recorded at US$81.68 per barrel, down from US$83.45 per barrel in June.
Changes in global oil prices can subsequently be reflected in the ICP, taking into account the formula and conditions of the Indonesian oil market.
Impact on the State Budget (APBN)
Rising oil prices can also impact the State Budget (APBN). When oil prices increase, the government potentially faces greater pressure on energy expenditure, especially if subsidised fuel prices and energy compensation are maintained.
In the 2026 APBN, the government uses an assumed ICP price of US$70 per barrel. When the realised oil price is significantly above this assumption, the risk to the budget becomes greater.
However, the final impact is not determined by oil prices alone. The Rupiah exchange rate, fuel consumption volume, state revenue from the oil and gas sector, and subsidy policies also influence the fiscal condition.
High oil prices can also exert pressure on inflation. An increase in fuel prices can raise transportation and goods distribution costs. If these costs are passed on to consumers, the prices of various goods and services may also increase.
The impact can be felt in everything from transport costs and food distribution to production costs in several industrial sectors.
Therefore, the government needs to ensure that rising energy prices do not create excessive pressure on public purchasing power.
Impact on the public
For the public, the most visible impact occurs if non-subsidised fuel prices undergo adjustments. An increase in fuel prices can raise travel costs and transportation expenses.
For businesses, rising oil prices can also increase operational costs, particularly for companies that rely on vehicles, machinery, or fuel in their production activities.
If the rise in oil prices persists for a long time, this pressure can trickle down to the price of goods and services through increased production and distribution costs.
Indonesia needs to remain vigilant regarding global oil prices.
The current global oil market conditions indicate that geopolitical factors remain one of the primary risks. Reuters estimates that Brent prices could remain above US$80 per barrel throughout 2026 if supply disruptions continue.
Thus, rising global oil prices need to be monitored not only because they have the potential to affect fuel prices, but also because they are linked to inflation, production costs, public purchasing power, and the health of the APBN.
For now, rising global oil prices do not mean that all Indonesian fuel prices will automatically rise. The government still has policies in place to maintain subsidised fuel prices, while non-subsidised fuel prices more closely follow economic viability and market conditions.