RI-Iran Negotiations Fail, RI Needs to Evaluate Energy Budget Posture

Following the failure of negotiations between the United States (US) and Iran, which has resulted in a prolonged crisis in the Strait of Hormuz, economist from Paramadina University Wijayanto Samirin believes the government needs to re-evaluate the energy budget posture in the state budget (APBN). “It is very necessary (to evaluate the budget), especially regarding the prices of non-subsidised fuel and LPG, and the volumes of subsidised fuel and LPG need to be adjusted to our fiscal capacity,” he told ANTARA in Jakarta on Tuesday. On the other hand, the step taken by Finance Minister Purbaya Yudhi Sadewa to guarantee that subsidised fuel will not experience an increase until the end of 2026 is deemed appropriate. Nevertheless, Wijayanto emphasises the need for improvements in subsidy distribution to make it more targeted. The negotiations between the US and Iran, held in Islamabad, Pakistan on Sunday (12/4), failed to reach an agreement. This failure has impacted a surge in global oil prices. Global oil prices jumped around 8 percent after US President Donald Trump announced threats of a blockade in the Strait of Hormuz. Brent crude oil prices were recorded at 102 US dollars (approximately Rp1.7 million) per barrel. On Sunday (12/4) at 22:01 GMT or Monday at 05:01 WIB, Brent crude oil prices for June delivery rose 7.76 percent to 102.59 US dollars per barrel. Wijayanto said that Brent oil prices still have the potential to continue increasing to break through levels above 100 US dollars per barrel if tensions between the two countries persist. If the US imposes a total blockade on the Strait of Hormuz to shut off Iran’s oil and gas exports, world oil analysts estimate that oil prices could skyrocket to 150 US dollars per barrel. “Of course, we all do not hope for this, and Trump may not dare to do it because he will face resistance from the American people themselves who will be hit by rising fuel prices domestically,” Wijayanto stated.