![](https://ugm.ac.id/wp-content/uploads/2024/06/isi-bensin-765x510.jpg)
In February 2024, Coordinating Minister for Economic Affairs Erlangga Hartarto assured the government would raise subsidized fuel prices in June 2024. This price freeze extended to non-subsidized fuel prices, maintained since the lead-up to the 2024 presidential election.
By the end of June 2024, the government had yet to decide on a July 2024 fuel price hike. Should the government raise fuel prices in July 2024 amid the weakening rupiah against the US dollar?
According to UGM Energy Economics analyst Dr. Fahmy Radhi, the government should no longer hold non-subsidized fuel prices, allowing Pertamina to set them according to economic value.
He argued that by doing so, the government would not have to compensate Pertamina for setting non-subsidized fuel prices below their economic value. Conversely, he advised against raising subsidized fuel prices in July 2024.
“Despite global oil prices trending upwards, reaching US$80.72 per barrel, the average global oil price remains lower than the Indonesia Crude Price (ICP) set in the state budget,” he stated at the UGM campus on Wednesday (Jun. 26).
Dr. Radhi pointed out that inflation is still manageable, with May 2024’s year-on-year (YOY) inflation at 2.8%. However, the rupiah continues to weaken against the US dollar, reaching Rp16,400 per US dollar.
Dr. Radhi advised against raising subsidized fuel prices in July 2024 based on these indicators. An increase in these prices would likely trigger inflation, raising the prices of essential goods and diminishing people’s purchasing power.
Amid ongoing rupiah depreciation, inflation would soar, further worsening Indonesia’s economy. This scenario could trigger an economic crisis because of the concurrent rupiah weakening and skyrocketing inflation.
Dr. Radhi recommended that the government adjust non-subsidized fuel prices to their value to prevent a potential economic crisis in Indonesia. He asserted that there is no urgency for the government to raise subsidized fuel prices in July 2024.
“The government should maintain subsidized fuel prices until December 2024. If President Joko Widodo’s administration insists on raising subsidized fuel prices in July 2024, it will undoubtedly burden the incoming administration of President-elect Prabowo Subianto,” he concluded.
Author: Agung Nugroho
Image: freepik.com