Middle East Conflict Impacts Oil Prices, Legislator Warns of Burden on State Budget

JAKARTA - Member of the House of Representatives Commission XI from the Golkar Faction, Eric Hermawan, stated that the main issue facing Indonesia’s economy is not the physical scarcity of oil supply due to the Middle East conflict, but rather the vulnerability of the State Revenue and Expenditure Budget (APBN) to fluctuations in global oil prices.

Eric explained that every $1 increase in the world oil price forces the state to redirect funds amounting to Rp67 trillion to cover the energy cost differential, thereby keeping domestic prices stable.

“Every $1 rise in oil per barrel costs the state Rp67 trillion. This price volatility instantly disrupts the state budget structure and necessitates large-scale fund reallocations,” Eric said in his statement on Tuesday (24/3/2026).

In Indonesia, he added, there is a practical rule of thumb used by fiscal technocrats to calculate the budget’s sensitivity to movements in global commodity prices.

For the 2026 APBN, the oil price assumption is around $70 per barrel. According to Eric’s calculations, if global tensions push the oil price up to $100 per barrel, that represents a $30 increase.

“This is a financial shock that must be managed to prevent it from collapsing the national economic structure. When the state’s burden surges, such as with an additional Rp201 trillion, the budget deficit will balloon. In the long term, this situation places Indonesia at high risk of violating the legal deficit limits,” he explained.

Therefore, Eric seeks to correct the misconception that the greatest threat to Indonesia’s energy resilience is physical disruptions to oil supply due to the Middle East conflict.

“If there is a disruption in one region, technically Indonesia still has room to seek substitutes from vendors in other areas, such as the United States, African countries, and Asia,” Eric added.