Oil Prices Fall, Subsidized Fuel Prices are likely to Be Cut

Kamis, 25 Mei 2023 | 09:25 WIB
Oil Prices Fall, Subsidized Fuel Prices are likely to Be Cut

ILUSTRASI. Oil Prices Fall, Subsidized Fuel Prices are likely to Be Cut. KONTAN/Cheppy A. Muchlis

Reporter: Siti Masitoh | Editor: Tiyas Septiana

KONTAN.CO.ID -  JAKARTA. The fuel (BBM) price reduction option is open again. The opportunity emerged after the Indonesian Crude Price (ICP) dropped to US$ 79,35 per barrel as of April 2023. 

The ICP price is lower than the ICP's assumption in the state revenue and expenditure budget (APBN) 2023, which is US$ 90 per barrel.

Lately, the rupiah has also tended to appreciate against the US dollar, compared to the beginning of the year. Jisdor exchange rate as of May 24, 2023 shows exchange rates of Rp 14.095 per US dollar (AS). The rupiah has strengthened and risen by 4.47% since the beginning of the year. 

Moreover, the government proposes a global crude oil price in the range of US$ 75 to US$ 85 per barrel in macro assumptions of the state revenue and expenditure budget. As for the US dollar, it is in the range of Rp 14.700-Rp 15.300.

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A member of The House of Representatives (DPR) from the PKS fraction, Mulyanto, estimated that the assumption was far below the condition when the fuel (BBM) subsidies were raised in September 2022. At that time, the exchange rate of the rupiah reached Rp 15,500 per US dollar. The world oil price is above $110 per barrel. Based on this comparison, the budget burden on fuel subsidies in 2024 should be reduced. He hopes that the budget difference can be allocated for fuel subsidies.

Eventually, the fuel subsidies, such as Solar and Pertalite will get cheaper. The Pertalite price is currently Rp 10.000 per liter, while Solar's is Rp 6.800 per liter. "The subsidized fuel price should go down now," Mulyanto said in a statement on Tuesday (23/5).

However, the head of the state revenue and expenditure budget, The Fiscal Policy Agency (BKF), Wahyu Utomo said the government has not yet planned to lower the price of subsidized fuel. He reasoned that the fuel subsidies price is not only determined by the ICP price but also by other factors.

The government should consider the rate of the rupiah as well. Then, supply and demand for fuel subsidies are no less important. Moreover, he projected that the volume of fuel subsidies consumption could rise again this year. This is the result of the economic recovery that began this year.

"The ICP price trend is indeed lowering; however, the Rupiah exchange rate is expected to depreciate again, and fuel volume is predicted to be potentially higher," Wahyu told KONTAN, on Wednesday (24/5).

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Reforminer Institute Executive Director Komaidi Notonegoro sees that it is still difficult to lower subsidized fuel prices now. Even though it goes down, the ICP price assumption is below US$70 per barrel.

Then the rupiah exchange rate at the initial assumption level is Rp 14,800 per US dollar. Meanwhile, the current rupiah exchange rate is still above the initial assumption.

Even so, the price of subsidized fuel in Indonesia, he claims, is still affordable. Fuel prices in Indonesia are among the cheapest in Southeast Asia.