By: Izra Anwar (Renewable Energy Activist)
ASCENSION The price of fuel oil (BBM) has always been an issue that consistently raises social, economic and political sensitivities in Indonesia. Every time the government adjusts fuel prices, the public response is generally dominated by concerns about rising transportation costs and increases in other basic needs. Of course, these concerns are justified because fuel is a strategic commodity that influences almost all of society’s economic activities.
However, behind the debate about whether or not it is necessary to increase fuel prices there is a fundamental question that often escapes public attention, why Indonesia continues to be in the same cycle when world oil prices rise, the government faces a dilemma between increasing fuel prices or increasing the subsidy burden, which is an option that is difficult to avoid.
In a broader perspective, fuel increases should not only be seen as a short-term economic problem. This event can be an important momentum to reform Indonesia’s energy towards a more sustainable, resilient and just energy system.
Costly Dependency
Dependence on petroleum is one of the biggest challenges in national energy development. Even though Indonesia was once known as an oil exporting country, this situation has changed in the last two decades. Based on data from the Ministry of Energy and Mineral Resources (ESDM), national oil production is currently around 580,000 barrels per day, while domestic consumption has reached around 1.6 million barrels per day. This gap between production and consumption means that Indonesia has to import large quantities of crude oil and fuel products to meet domestic energy needs.
This import dependence has significant economic consequences. When world oil prices increase due to geopolitical conflicts or global market uncertainty, the government’s fiscal burden also increases. At the same time, the government is faced with a difficult choice: increase fuel prices and face social pressure, or maintain subsidies with the consequence of increasing state spending.
This condition shows that the main problem does not lie in fuel prices alone, but in the national energy structure which is still very dependent on fossil energy. The greater the dependence on fuel, the greater the economic vulnerability that the country must bear
Fuel Crisis as Momentum for Change
History shows that many countries have succeeded in turning the energy crisis into a momentum for reform. The world oil crisis in the 1970s prompted a number of countries to carry out major transformations in their energy policies. Denmark, for example, is reducing its dependence on oil through massive investments in wind energy and energy efficiency. As a result, the country is now one of the world leaders in the development of renewable energy.
This experience provides an important lesson that the energy crisis is not always seen as a threat. In the Indonesian context, the increase in fuel prices can be an alarm that national energy security is not enough to rely solely on subsidies and oil supplies. Indonesia needs a long-term strategy that is able to reduce dependence on fossil energy while strengthening national energy independence.
This momentum is becoming increasingly important because Indonesia has committed to achieving the net zero emission (NZE) target by 2060 or sooner. Without transformation of the energy sector, this target will be difficult to realize. The energy transition is not only an environmental agenda, but the energy transition is an economic and national development agenda. Countries that adapt more quickly to low-carbon economies have the potential to gain benefits through the creation of green jobs and increased industrial competitiveness in the future.
Accelerating Energy Transition and Transportation Reform
The strategic step that needs to be accelerated is the development of renewable energy. According to data from the Ministry of Energy and Mineral Resources (ESDM), Indonesia has a very large NRE potential, namely 3,686 GW. This potential consists of geothermal energy, solar energy, wind, hydro, biomass and marine energy. However, utilization of this potential is still relatively low compared to other countries that have more limited resources.
The low use of renewable energy is not caused by a lack of resources but by various structural obstacles such as weak regulatory certainty, limited investment and inadequate transmission infrastructure, which are the main factors hindering the acceleration of the energy transition. Therefore, energy reform must start with the government’s courage to create a more conducive investment climate. Certainty regarding electricity tariffs, the mechanism for purchasing energy by state electricity companies, and the direction of long-term energy policy are important signals for investors to invest their capital in the clean energy sector.
However, it is not enough for energy reform to only be carried out in the electricity sector. The transportation sector is one of the largest fuel users in Indonesia. Data from the Ministry of Energy and Mineral Resources shows that the transportation sector consumes more than 52% of total national fuel consumption, therefore efforts to reduce fuel consumption must be accompanied by reform of the national transportation system, with the development of integrated public transportation. At the same time, the development of electric vehicles needs to be encouraged in a gradual and measurable manner. Because Indonesia has a great opportunity to build an electric vehicle industrial ecosystem because it is supported by abundant mineral resources.
Finally, Indonesia’s problem is not merely a matter of rising or falling fuel prices. A more fundamental problem is how to build an energy system that is no longer vulnerable to fluctuations in world oil prices. Fuel increases often trigger public discomfort and debate, but the momentum that arises from them should not be wasted. If energy reform continues to be postponed, Indonesia will only repeat the same cycle with each subsequent energy crisis. On the other hand, if this momentum is used to accelerate the energy transition, strengthen renewable energy, and build a more efficient transportation system, then the increase in fuel prices can be a starting point towards energy independence that is more sustainable, resilient and just.
Disclaimer:
This article is the author’s personal view, not the official position of the viralterkini.id editorial team. The information is presented as best as possible but is not guaranteed to be absolute. All use is the responsibility of the reader.
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