Pertamina price hike of 92-gasoline may shift Indonesia consumption

JAKARTA : Indonesia's state energy firm PT Pertamina raised on Friday the price of its 92-octane gasoline grade in line with higher global crude prices, but some economists warned that the move may cause a shift in consumption to cheaper subsidised fuels.

Pertamina said late on Thursday the price of the popular high-grade fuel known as Pertamax would rise to between 12,500 rupiah and 12,750 rupiah ($0.87-$0.88) from April 1.

The price of the fuel was increased from a range of 9,000 rupiah to 9,400 rupiah per litre, which had been the level since 2019, Pertamina said in a statement late on Thursday.

Pertamina described the price change as "unavoidable" after the Indonesia Crude Price (ICP) had increased to $114.55 per barrel as of March 24, up from $73.36 in December, with the war in Ukraine driving up global energy prices further.

The impact of the price adjustment to Indonesia's annual inflation rate would be limited as Pertamax is not as widely used as the 90-octane and 88-octane grades of fuel, which are subsidised, said Bank Mandiri economist Faisal Rachman.

He estimated there would be a 0.2 percentage point increase in Indonesia's annual inflation rate due to the price hike.

The price of the more widely used 90-octane gasoline was kept unchanged at 7,650 rupiah per litre, Pertamina said. Pertamax only account for 14per cent of its total fuel sales.

"What should be noted is that the increase in Pertamax prices can trigger a switch to cheaper gasoline such as Pertalite," Faisal said, referring to 90-octane gasoline.

"This could lead to an increase in Pertalite consumption exceeding the quota allocated by the government," he said.

Pertalite is designated as a "special assignment" fuel, which means the government pays the state energy company compensation if sales incur cause losses when global oil prices rise.

Indonesia scrapped gasoline subsidies in 2015, but authorities have since continued to regulate retail prices for Pertamina's Pertalite and its 88-octane gasoline.

($1 = 14,360.0000 rupiah)