The middle class makes up most of the people who buy non-subsidized fuel like Pertamax. Jakarta (ANTARA) - The atmosphere inside the Presidential Palace Complex on Thursday (June 18) shifted from routine statecraft to cautious optimism.
While President Prabowo Subianto briefed the directors and commissioners of Indonesia's state-owned banks, reporters ignored normal financial news.
Instead, they asked economic ministers about one major global development: the sudden peace agreement reached between the US and Iran.
Hours earlier, US President Donald Trump and Iranian President Masoud Pezeshkian signed a historic memorandum of understanding online.
The most immediate result of this deal is the reopening of the Strait of Hormuz. This narrow shipping route connects the Persian Gulf to the Gulf of Oman and carries one-fifth of the world’s oil supply.
With the official signing ceremony scheduled to happen this Friday in Switzerland, global energy markets are preparing for a major return of oil supplies.
The development could ease pressure on Indonesia, which has faced elevated energy costs in recent months. In other words, for Indonesian, which has suffered from months of soaring energy costs, this news brings great relief.
However, government officials are asking the public to be patient. They warn that it will take time for this international breakthrough to actually translate into cheaper fuel at local gas stations.
Speaking to the press, Coordinating Minister for Economic Affairs Airlangga Hartarto confirmed that the reopening of the strait will heavily weigh on upcoming fuel price adjustments, particularly for non-subsidized brands like Pertamax.
However, he emphasized that the government is in "wait-and-see" mode.
The impact of the agreement will not be immediately felt, Airlangga cautioned, noting that the government must first monitor the implementation of the deal and the actual stabilization of global oil distribution.
This careful approach from the government is due to how the oil market works. The prices of non-subsidized fuels depend on strict market formulas tied to global oil prices, not on government decisions.
In theory, if global oil prices keep falling, local fuel prices will eventually go down too. The real problem is how long that will take.
Energy and Mineral Resources (ESDM) Ministry calculates the Indonesian Crude Price (ICP) using a monthly average. Because of this, the price drops from reopening the Strait of Hormuz will not show up immediately; they will only be reflected in next month's official price.
This delay will likely last longer than just one month. Experts estimate it could take four to eight weeks for oil prices to fully steady, even after the shipping route officially opens.
Several things are slowing down this return to normal. Shipping companies are still dealing with long lines of oil tankers, low oil supplies, and very high insurance costs left over from when the route was closed.
On top of that, the Indonesian government knows that Middle Eastern peace can be fragile. What was signed on Thursday was just a preliminary agreement, not a final fix for the region's problems—and the US is known for making sudden, unexpected policy changes.
Related news: Indonesia monitors US-Iran peace deal impact on fuel prices
Fiscal room
The impact of the oil crisis went beyond gas prices—it also hurt the government’s finances.
In the 2026 State Budget, the government planned for oil to cost just $70 a barrel. But when the US-Israel-Iran war started in March and the shipping route closed, oil prices jumped way past that plan, hitting $102.26 in March and $117.31 in April.
The government had to use extra state money to cover these high costs by paying for bigger fuel subsidies and more expensive oil imports. Now that global oil prices have dropped back down to around $80, those extra costs are turning into savings.
As Indonesia needs to import about 1.6 million barrels of oil every day, every single dollar that oil prices drop saves the country a lot of money. These improvements are already beginning to be seen in other areas of the economy.
The Jakarta Composite Index (JCI) returned above 6,000, and the rupiah strengthened below Rp18,000 per US dollar.
The government’s budget is no longer under so much pressure, which gives officials more flexibility to spend money on other important needs.
The impact extends beyond the government's balance sheet.
The middle class makes up most of the people who buy non-subsidized fuel like Pertamax. If Pertamax prices drop along with global oil prices, it will give middle-class families more spending power again after months of tight budgets.
Simultaneously, the aviation sector is preparing for a soft landing. Airline ticket prices skyrocketed in April after a massive surge in aviation fuel prices, driven by Middle Eastern turmoil.
The significant rise in global aviation fuel prices is a major driver of rising airfares.
If gl…
Read the full article at Antara News →
ID