Maintaining Stability Amid Global Oil Price Volatility
The domino effect of rising oil prices inevitably creates discomfort for everyone, as it is invariably followed by increases in the prices of goods and services. Therefore, whatever steps the government takes as a regulator in response to the current oil price increases, such policies should always form an integral part of sustained efforts to preserve and maintain national stability.
It is clear that Indonesia, along with many nations, cannot escape the consequences of the current conflict involving Iran against the United States and Israel. The effects of this conflict are already being felt across various aspects of life, including the economy, marked by rising oil prices. The Middle East is the centre of global energy production and supply. When that region is shaken by war, the global economy inevitably feels the direct consequences.
Since the war began, world oil prices have risen substantially. Brent crude oil prices have reached a 30 percent increase. Meanwhile, WTI (West Texas Intermediate) oil prices, in recent weekend trading, surged more than 38 percent compared to the closing before the conflict began.
The rate of global oil price increases could continue as the Qatari government has warned that oil and gas production in the Gulf region could halt within days if the Middle Eastern conflict continues. This is the problem currently facing Indonesian society alongside the global community.
As a factor in the production and distribution process, rising oil prices always and inevitably create a domino effect or logical consequence. Higher oil prices automatically increase production and distribution costs. Rising prices for goods and services become unavoidable when production and distribution costs become more expensive than before. When that trend becomes reality, accelerating inflation is inevitable.
This is the possibility that everyone will face as a result of the current turmoil in the Middle East. The duration of global oil price volatility is difficult to predict, especially after Iran closed the Strait of Hormuz as the primary route for global oil trade and distribution.
Not only will society as consumers feel the domino effect from the current global oil price increases. The government, as manager of state finances, also cannot escape the impact of surging oil prices. This is because, by implementing fuel subsidy policies, the government must certainly recalculate its spending.
The value of fuel imports will certainly become more expensive than before. This is the real manifestation of pressure on the state budget structure. It has been announced that as of February 2026, the state budget deficit stands at Rp 135.7 trillion. The degree of pressure will be felt significantly if the global oil price increase is accompanied by strengthening of the US dollar exchange rate or weakening of the rupiah. Recently, Bank Indonesia announced that foreign exchange reserves as of February 2026 declined by 2.7 billion US dollars, to 151.9 billion US dollars.
Rather than merely being vigilant, the impact of rising oil prices in the global market should be addressed tactfully and with wisdom for the benefit of all elements of society. Mounting pressure on the current year’s state budget is commonly addressed by increasing efficiency. When pressure on the state budget reaches the tolerance limit, several efficiency policy options are always available. From reducing government spending to adjusting or reducing subsidies, including reducing fuel subsidies.
Indeed, to respond to surging global oil prices, the possibility for the government to adjust subsidised fuel prices remains open. Adjustment is necessary to ensure that society’s fuel needs remain available. In the context of such subsidised fuel price adjustments, society deserves an explanation.
This is because rising prices for goods and services, including adjusted subsidised fuel prices, always cause discomfort. This is because price increases occur when individual or family income does not change—it remains the same. Rising prices always cause a decrease in purchasing power. Declining purchasing power often pushes individuals and many families to postpone or cancel their desire to meet several needs, including basic necessities. For example, postponing a child’s education because of cost limitations.
From this discomfort, society will express disappointment, even anger, towards government policy on raising fuel prices. A stream of criticism towards the government will flow very intensely. There are many historical records that recount society’s reaction to subsidised fuel price increases. Criticism will be heard more loudly, because contemporary society uses social media to voice its aspirations, both individually and as communities.
Whatever steps or policies are pursued, the government is certainly urged to always be wise in responding to society’s aspirations. Such policies should always form an integral part of sustained efforts to preserve and maintain national stability.
Therefore, to maintain national energy resilience amid current global turmoil, the government’s option to import fuel and LPG from the United States should be supported. This is because the closure of the Strait of Hormuz will consequently create serious disruptions to fuel and LPG availability in Indonesia.
This option can at least reduce the potential for current problems, as it is already a fact that the world is not in good condition. If this option is realised, national stability will be preserved because Indonesia can avoid the possibility of facing fuel and LPG shortages.