Indonesia's Energy Import Bill Surges Amid Global Oil Price Shock

Indonesia is facing significant pressures on its economy as the global oil price shock continues to escalate. The country's oil-and-gas import bill jumped 40.2% year-on-year to US$25.8 billion from January to July 2026, according to an analysis by The Business Times based on Statistics Indonesia data. This sharp increase has outpaced a 10.9% rise in physical volumes, leading to a widening trade deficit that increased by 78.2% to US$18.8 billion during the same period.

In response to these challenges, the Indonesian government has implemented measures to shield consumers from the full brunt of rising energy costs. President Prabowo Subianto emphasized the need for a transition to renewable energy sources, noting that Indonesia spends between US$28 billion and US$30 billion annually on fuel imports and highlighting the urgency for a shift towards domestic energy solutions.

“Prabowo Subianto said Indonesia spends between US$28 billion and US$30 billion annually on fuel imports.”Prabowo Subianto, President of Indonesia

To mitigate the impact of rising oil prices, Indonesia is also focusing on its B50 biodiesel program, which aims to reduce reliance on imported fossil fuels. The government is transitioning to B50, a biodiesel blend, as part of a broader strategy to enhance energy sovereignty and reduce import costs.

Furthermore, the Ministry of Energy and Mineral Resources (ESDM) set the average price of Indonesian crude oil at USD117.31 per barrel in April 2026, up from USD102.26 in March, as stated in Ministerial Decree No. 203.K/MG.03/MEM.M/2026. This increase has been attributed to geopolitical tensions in the Middle East, including conflicts involving the United States, Israel, and Iran, which have raised concerns over global oil supply disruptions. Laode Sulaeman, the Director General of Oil and Gas at ESDM, explained that these geopolitical factors, combined with strong economic growth in China, are influencing global oil demand.

“Yusuf Rendy Manilet said the combination of rupiah depreciation and high energy prices will directly increase the import burden.”Yusuf Rendy Manilet, Economist at CORE Indonesia

Economists are projecting that Indonesia's crude oil import values will remain high through the end of 2026, driven by a weaker rupiah and ongoing supply chain disruptions. Yusuf Rendy Manilet from the Center of Reform on Economics (CORE) Indonesia indicated that anticipated interest rate hikes by the US Federal Reserve could further weaken the rupiah against the US dollar, exacerbating the import burden for Indonesia, a net oil importer.

In a recent statement, Bahlil Lahadalia, the Minister of Energy and Mineral Resources, noted that the Indonesian Crude Price (ICP) has reached between US$91 and US$92 per barrel on average since the beginning of the year, although it has spiked above US$100 per barrel due to global uncertainties. He emphasized that the average ICP reflects the volatility of the international oil market, which has been influenced by geopolitical tensions and supply chain issues.

Indonesian coverage stressed the direct impact of global oil price fluctuations on domestic energy security, while some outlets framed the situation as a call for urgent reforms in energy policy. Bahlil pointed out that the average ICP for September 2026 was set at USD112.81 per barrel, marking a significant increase attributed to heightened geopolitical risks and disruptions in supply chains. He also mentioned that the price of coal has risen to US$154 per ton, indicating broader commodity price pressures.

As the government navigates these challenges, it is also ensuring that the national fuel reserves remain stable, with Bahlil confirming that the stock levels for Pertalite are maintained at 16 to 20 days, while other fuel types exceed 20 days. This assurance contrasts with concerns raised by some economists about the sustainability of energy subsidies and the need for improved energy consumption efficiency.

Manilet urged the government to enhance energy efficiency and manage subsidies effectively to mitigate the economic impact of rising oil prices. He noted that even if crude oil prices decline, geopolitical risk premiums and logistics costs could persist, keeping import expenses elevated.