UPI Professor Urges Energy Efficiency and Self-Sufficiency as Solution to Fuel Price Hikes
Amid surging global oil prices and a weakening rupiah, the government has raised the prices of non-subsidised fuels Pertamax and Pertamax Green, a move requiring adaptive measures and a long-term strategy to strengthen national energy resilience.
Professor of Microeconomics and Economic Education at the Faculty of Economics and Business Education (FPEB) of the Indonesian University of Education (UPI), Eeng Ahman, assessed that energy efficiency, protection of the public through subsidised fuels, and the acceleration of energy self-sufficiency are the primary solutions to face increasingly dynamic global energy price volatility.
According to Eeng, the price increases for Pertamax and Pertamax Green cannot be separated from global economic conditions, particularly rising world oil prices due to geopolitical conflict in the Middle East and pressure on the rupiah exchange rate impacting energy import costs. From a microeconomic perspective, these two factors directly affect the cost structure and pricing of domestic fuels.
“In economic theory, when a good becomes scarcer or the cost of obtaining it rises, the price tends to increase. Similarly, for imported goods, a weakening domestic currency will increase procurement costs. Therefore, the combination of rising world oil prices and a weakening rupiah exerts strong pressure on domestic fuel prices,” he explained.
Eeng noted that the fuel price hike not only impacts production costs but also influences public consumption behaviour. People tend to adjust their spending and mobility patterns when energy costs rise. On the other hand, business actors, especially MSMEs in the transportation, culinary, and delivery service sectors, face rising operational costs that could potentially suppress productivity. In this context, energy efficiency is the most realistic short-term step.
“These efforts need to be undertaken jointly by the government, the business world, and the public to reduce the impact of rising energy costs on economic activity. In the short term, the most realistic approach is to encourage fuel efficiency, both by the public, businesses, and the government,” he clarified.
Beyond efficiency, Eeng also assessed the need to maintain the stability of subsidised fuels as a social protection instrument. Subsidised fuels like Pertalite and Biosolar still play a vital role in preserving public purchasing power and supporting the continuity of economic activities for vulnerable groups, including MSMEs. Amid these conditions, Eeng understands the adjustment of non-subsidised fuel prices by Pertamina as a rational step from an economic perspective. As a company operating within market mechanisms, Pertamina needs to maintain business sustainability and avoid losses due to global energy price fluctuations.
“However, as a state-owned enterprise, Pertamina must also ensure that the policies adopted continue to consider the public interest,” he stressed.
Furthermore, Eeng emphasised that the most fundamental solution to mitigate the impact of global oil price volatility is to strengthen national energy resilience. Indonesia needs to increase domestic energy production capacity, expand refinery construction, and optimise the utilisation of national energy resources so that dependence on the global market can be gradually reduced.
“In the long term, the government must strengthen national energy resilience by increasing domestic energy production capacity and striving to achieve energy self-sufficiency. Thus, Indonesia will have a stronger economic foundation to face various future global economic shocks,” he stated.
Eeng added that strengthening energy resilience must go hand in hand with bolstering food security and other productive sectors. With a more independent economic foundation, Indonesia is expected to be able to maintain price stability, protect public purchasing power, and sustain economic growth momentum despite facing global uncertainty.
Eeng’s views indicate that the fuel price increase should be seen as both a challenge and a momentum to strengthen energy efficiency and build national energy independence. In the short term, protecting the public through subsidised fuels and increasing energy efficiency are important steps to maintain purchasing power. Meanwhile, in the long term, accelerating energy self-sufficiency and strengthening national energy resilience are key strategies to reduce Indonesia’s vulnerability to global energy price volatility.