Indonesia hikes price of widely used fuel by 32%

The price of 92-octane gasoline, known as Pertamax and widely used by the country’s middle class, has been raised to Rp16,250 (US$0.9053) per liter from Rp12,300 per liter, a 32.1% increase.

Pertamax Green, a 95-octane fuel blended with ethanol, has been raised to Rp17,000 per liter from Rp12,900 per liter, a 31.8% rise.

The Pertamax ⁠fuels are normally not subsidized, and it was not known if Pertamina would be compensated for keeping the price unchanged since the war began.

The price rises came after Bank Indonesia unexpectedly raised interest rates for the second time in a month on Tuesday to shore up confidence in the currency and budget data last week showed the cost of subsidies for fuel, power and fertilizers had jumped 208% in May from a year earlier.

Finance Minister Purbaya Yudhi Sadewa said the inflationary impact of the price rises was expected to be limited because the fuels are not used for public transportation. The ‌annual ⁠headline inflation rate accelerated to an eight-month high of 3.08% in May.

DBS Bank senior economist Radhika Rao said the affected fuels accounted for about 7% of domestic fuel sales and 7.5% of energy consumption in the transportation sector in 2023. She said alongside monetary policy adjustments, fiscal policy also needed to adopt a ⁠defensive stance to support the economy.

Masgal Carta, a worker in Bandung, West Java, said the sudden price rise was going to further squeeze his finances.

“Honestly, I was quite shocked this morning when I found out that ⁠fuel prices had gone up, because my motorbike also uses Pertamax,” he said.

“My income has stayed the same, prices of basic goods have already started to rise, and now fuel, our main ⁠means of transportation to get to work, has increased suddenly,” Masgal told Reuters.

The price of the subsidized 90-octane fuel known as Pertalite was unchanged, Pertamina said.