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Are Fuel Prices Ready to Rise?

Fuel prices
Are Fuel Prices Ready to Rise?

President Joko Widodo (Jokowi) and Finance Minister Sri Mulyani Indrawati have made coded references to the potential for a hike in fuel prices in the near future. 

The message was delivered by Jokowi and Sri Mulyani through their official Instagram accounts, as quoted by CNBC Indonesia, Tuesday 30th August 2022. Both uploads referred to social assistance to ease the burden on the community.  

In his post, Jokowi explained the results of a limited meeting with his ministers conducted on Monday 29th August. In a closed meeting, the government decided to distribute additional social assistance to the community. 

The total additional social assistance funds total Rp24.17 trillion, of which Rp 12.4 trillion is in the form of direct cash assistance and Rp9.6 trillion is earmarked for salary subsidy assistance for workers whose income is below Rp3.5 million per month.  

“I hope that the social assistance provided by the government can ease the burden on people who are faced with pressure from various price increases,” said Jokowi.

Meanwhile, Indrawati’s latest post stated that the government was continuing to use state financial instruments to protect the people. The subsidy and compensation budget for fuel and electricity has tripled to Rp502 trillion and is estimated to continue to climb to Rp698 trillion due to rising food and energy prices triggered by geopolitical issues.

The very large fuel subsidy budget, above Rp600 trillion, is enjoyed by the upper middle class. Only 5 percent of the diesel subsidy is enjoyed by poor families. Meanwhile, the Pertalite subsidy is only enjoyed by the poor,” she explained.

The limited meeting also asked regional heads to use two percent of general transfer funds, both general allocation funds (DAU) and profit sharing funds (DBH) of Rp2.17 trillion to assist public transportation, motorcycle taxis, fishermen, and other additional social assistance. 

“The president hopes that the transfer of fuel subsidy assistance to the neediest and poor groups can ease the burden caused by the pressure of rising prices,” added Indrawati. 

The government’s decision to distribute additional social assistance has further strengthened the signal of an increase in fuel prices on 1st September 2022.

Even with the possibility of an increase in Pertalite fuel prices at Pertamina gas stations, it is still expected to be priced below Rp10,000 per litre with a predicted increase of Rp1,000 to Rp2,500 from the current price of Rp7,650 per litre. Furthermore, Pertamax is expected to also increase from the current position of Rp12,500 per litre.

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