Jakarta. Surging global oil prices nearing $100 per barrel amid escalating tensions in the Middle East could force Indonesia to significantly increase energy subsidies and reallocate state spending, including potentially cutting the Free Nutritious Meals (MBG) program, economists warned.

Senior economist at Paramadina University Wijayanto Samirin said the conflict involving Iran risks disrupting global oil supply routes, particularly around the Strait of Hormuz and the Persian Gulf, regions that play a crucial role in global oil and gas flows.

He warned that oil prices could continue climbing if supply disruptions worsen. Historically, he noted, oil once surged to the equivalent of $180–$200 per barrel in today’s prices during the 1980 Iranian Revolution, when the country nationalized its oil production.

Indonesia could face major fiscal pressure if the conflict drags on.

“My estimate is that, assuming the conflict persists, even maintaining limited fuel subsidies would require an additional Rp 120 trillion to Rp 160 trillion this year,” Wijayanto said. “Therefore, the government must take at least three strategic steps. For this month in particular, fuel supply must be secured to support the Lebaran homecoming travel season.”

First, the government must ensure adequate fuel supply and distribution in March, when travel demand typically surges ahead of the Eid holidays. Second, authorities must ensure smooth imports of crude oil and fuel in the coming months while preparing sufficient fiscal space to finance energy subsidies. Third, Indonesia needs to reduce its heavy reliance on Middle Eastern oil by diversifying supply sources and accelerating renewable energy development.

“The current situation should become momentum to push the role of renewable energy,” he said.

Wijayanto said the government should maintain current prices for subsidized fuels such as Pertalite and Bio Solar unless global oil prices rise sharply. “This is because inflation has started to creep up and household purchasing power, especially among the middle class, must be protected,” he said.

However, he suggested the government may need to temporarily reduce spending on the Free Nutritious Meals (MBG) program to maintain fiscal stability.

“At this moment, there may be no option but to temporarily cut the MBG budget and restore it once fiscal conditions allow,” he said.

Subsidy Burden on State Budget

Economist Nailul Huda from the Center of Economic and Law Studies (Celios) said rising oil prices could significantly increase the subsidy burden on Indonesia’s state budget (APBN).

Using assumptions based on current state revenue and spending projections, he calculated that reallocating budget funds, including from programs such as MBG, could become a rational policy option to sustain fuel subsidies.

According to the Mean of Platts Singapore (MOPS) benchmark, oil prices have recently reached around $97 per barrel, while Brent crude trades near $92 per barrel. At one point, MOPS contracts even reached $144 per barrel, and several institutions project global oil prices could climb to $120 per barrel.

Under those assumptions, the economic price of Pertalite would rise sharply. If oil reaches $97 per barrel, Pertalite’s economic price would be about Rp 15,000 per liter. At $120 per barrel, the price could climb to around Rp 18,200 per liter, while at $144 per barrel it could reach roughly Rp 17,400 per liter.

“But raising Pertalite prices could negatively affect household consumption,” Nailul said.

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