Indef: The State Budget Could Be Pressured If Oil Prices Continue to Rise

JAKARTA, KOMPAS.com — Global geopolitical turmoil driving energy price spikes again draws attention to Indonesia’s economy. A country still dependent on energy imports faces fiscal pressure if world oil prices move far above the assumptions in the State Budget (APBN). The Monitoring Issue of Food, Energy and Sustainable Development report released by the Centre for Food, Energy and Sustainable Development (CFESD) of the Institute for Development of Economics and Finance (Indef) shows that escalation of conflict in the Middle East has increased the risk of disruption to global energy supplies. In this context, global energy price volatility affects not only the energy sector but also has direct implications for fiscal policy, particularly through energy subsidies and compensation.

Abra Talattov, Head of CFESD Indef, said that spikes in global energy prices can exert pressure on the APBN because domestic energy pricing remains heavily dependent on government intervention. ‘The APBN continues to function as the main shock absorber against fluctuations in global energy prices,’ Talattov said in the report, cited on Thursday (5/3/2026).

International crude Brent prices were under pressure throughout 2025 before rising again as geopolitical tensions increased. Data in the Indef report shows that by the end of January 2026 Brent was around $66.7 per barrel, down about 15 percent year on year. However, the escalation of the conflict between the United States and Israel against Iran pushed Brent up to around $82 per barrel, up about 13 percent since the conflict began.

This new energy risk constellation also relates to potential disruptions to global energy trade routes, especially the Strait of Hormuz. This strategic maritime route is one of the most critical points in the global energy trading system as around a fifth of the world’s crude oil supply passes through the area each day. Supply uncertainty from the Persian Gulf could trigger larger energy price spikes if the conflict continues or intensifies.

In the structure of national energy policy, the Indonesian government uses subsidies and compensation to keep domestic energy prices stable. This policy makes the APBN the main buffer when global energy prices rise. The report notes that the surge in global energy prices in 2022 triggered a sharp increase in energy subsidies and compensation.