Is it necessary to continue subsidizing the fuel price in Indonesia ?

At present, domestic fuel demand is high and not comparable to that can be provided by domestic production. Therefore, the government chose the option to import fuel using state funds. It raises the pros and cons regarding the absorption of state budget funds to import fuel expense allocated to other expenditure purposes. Furthermore, based on the reasons for avoiding the “social Unrest”, the government issued a policy of fuel subsidy which again take state funds.

Here are some facts about the dispute over fuel supply issues with the latest data (2013):
• Gasoline is expected to continue growing at a rate of 11% per year, while diesel is 5% per year

• limited capacity of the refinery gasoline, 1122 barrels / day, with the production of gasoline, in 2012, approximately 10.8 million kilo liters (KL) and diesel about 20 million KL.

• Supply of crude oil in the country is also limited. In 2012, the domestic requirement of 1533 thousand barrels per day, and imports reached 715 thousand barrels of oil per day (47% of the national fuel consumption).

• The Posture of ABPN for other purposes are diminished. Fluctuation of international oil market also directly in the ‘absorp’ by the state  budget, and frequently revised.

• State revenues in the oil and gas sector to fund fuel subsidy practical. When coupled with electricity subsidies, which in 2012 reached Rp. 93 trillion, energy subsidies reached Rp.310 trillion. Thus, practically depleted oil and gas revenues from subsidies for energy (fuel and electricity)

• The amount of subsidies provided in the state budget depends on four (4) factors:
a) domestic fuel needs (volume of subsidized fuel);
b) world oil prices are a benchmark – ie, MOPS;
c) the value of the Rupiah against the USD;
d) the structure of subsidized fuel prices in the country.
Unless the structure of subsidized fuel prices, other factors are
outside of the government control.


what It is remains unclear about to understanding the question,” Is it necessary to continue subsidizing the fuel price in Indonesia ?”.


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