INDONESIA’S ENERGY ADDICTION The looming dilemma of fuel subsidies

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Payment of compensation funds to Pertamina must be made immediately. So far, the Government seems to delay repayment of its obligation for compensation funds, which has resulted in further pressure on Pertamina’s cash flow. The delay in payment of compensation funds could result in a decrease in Pertamina’s ability to distribute fuel and LPG. The compensation fund impediment has not been clear whether due to technical audit problems or problems with the availability of funds. But the slow disbursement of compensation funds should not have happened had it gone according to schedule. 

The limbo in fuel policy also related to energy transition. The switch to renewable energy is an urgent matter, if the current global energy crisis is to be utilized for the transition to cleaner energy. Fluctuations in crude or fossil oil prices have been shown to create quite dangerous fiscal vulnerabilities. The change from fossil dependence to renewable energy will reduce the cost of fuel subsidies significantly, while creating new job opportunities in the electric vehicle ecosystem and renewable energy itself. However, the commitment to switch to renewable energy is actually less obvious, because it is considered that developed countries are currently busy using fossil fuels as an emergency measure. But such a plan is actually based on a weak foundation; actually, emergencies will continue to occur as long as the country’s dependence on fossil energy is so high. We never know what kind of war it will be that will make oil and gas prices soar again and again. 

Bhima Yudhistira
Bhima Yudhistira is Executive Director of Celios (Center of Economic and Law Studies) He received a Bachelor’s Degree from the University of Gajah Mada Faculty of Business and Economics and a Master’s Degree from Bradford University, U.K.

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A just energy transition certainly requires various regulations and supporting infrastructure, for example, the legal umbrella of the Renewable Energy Bill (RUU EBT) should seriously be discussed immediately, by encouraging a just energy transition. Then the issue of affordability of electric vehicle prices for the middle class, availability of charging stations in various places, to reduce imports of battery components and electric cars through manufacturing relocation to Indonesia, also needs to be implemented quickly. Short and long-term strategies in energy transition are not just commitments, but require day-to-day progress. 

We live in uncertain times; the fuel price polemic will continue, about whether it is necessary to increase prices or limit them through various means. The debate about energy policy will be intertwined with politics, especially ahead of a political year. Government needs to focus on taming high inflation before it’s too late, before it is driven by short-sighted political interest. (Bhima Yudhistira)