Jakarta. Rising prices of 12-kg LPG and non-subsidized fuel are set to squeeze Indonesia’s urban middle class while risking a spillover into the subsidized energy system, as analysts warn of shifting consumption patterns and mounting fiscal pressure.

Trimegah Sekuritas Indonesia estimates the hikes will add around 0.1% to 0.3% to short-term inflation, depending on how quickly higher energy costs pass through to transport and logistics.

“Pressure will not stop at the inflation figure alone. It would be different if subsidized prices were also raised. Hopefully, those remain unchanged,” Trimegah Chief Economist Fakhrul Fulvian said in a statement on Monday.

Fakhrul said the most vulnerable group sits between lower-income households and affluent consumers: the urban middle class, which relies heavily on non-subsidized fuel but does not receive social assistance.

“They do not receive social aid, yet they are highly sensitive to rising living costs, especially transportation and household energy,” he said.

He warned that this segment plays a key role as a “shock absorber” for domestic consumption. A decline in their purchasing power, coupled with falling asset values such as private vehicles, could ripple through household balance sheets and weaken overall demand.

Beyond demand risks, Head of Institute for Development of Economics and Finance (Indef) Center of Food, Energy, and Sustainable Development (FESD) Abra Talattov highlighted a parallel concern: higher non-subsidized LPG prices could drive consumers to switch to subsidized products, straining the government’s quota system.

“Looking at global crude oil price developments, energy commodities — especially fuel and LPG — are inevitably subject to price adjustments, particularly for non-subsidized products,” Abra said in Jakarta on Monday.

He cautioned that widening price disparities between subsidized and non-subsidized LPG could trigger a shift in consumption.

“There is clearly a risk of migration from non-subsidized consumers to subsidized users,” he said.

Abra added that Indonesia’s subsidized LPG distribution remains relatively open and not fully targeted, raising the risk of leakages if demand surges.

“The government needs to accelerate efforts to ensure subsidies are better targeted. As we know, subsidized LPG is still distributed quite openly,” he said.

He added that the subsidized LPG quota, estimated at around 8.3 million metric tons, could be exceeded if such a shift materializes.

“When there is a significant shift, the government must anticipate the risk of exceeding the quota,” he said.

An overrun, he warned, would directly increase the state’s subsidy and energy compensation burden.

“If the quota is exceeded, not only has the government already provided subsidies, but the excess volume will also add to energy subsidy and compensation costs,” Abra said.

He estimated that 5% to 10% of consumers could switch to subsidized LPG if price gaps widen further, particularly as households become more sensitive to living costs.

“If the price disparity widens, there is potential for a 5% to 10% shift from non-subsidized to subsidized consumers,” he said.

To mitigate the broader economic impact, Fakhrul urged the government to go beyond social assistance for low-income groups and introduce more targeted cushioning measures, including stronger public transport subsidies and incentives for the logistics sector to contain price pass-through.

“For instance, strengthening public transport support or providing incentives to the logistics sector to limit price transmission. We need policy design that also safeguards middle-class purchasing power, as that is where aggregate consumption is anchored,” he said.

He also flagged potential second-round effects stemming from global geopolitical uncertainty, warning that higher energy prices could spill over into food costs and broader inflation expectations.

“Energy price increases can spread to food, logistics, and inflation expectations. Therefore, close coordination between fiscal and monetary policy is crucial to ensure inflation expectations remain anchored,” Fakhrul said.

State oil and gas company Pertamina has officially raised the price of non-subsidized 12 kg liquefied petroleum gas (LPG) from Rp192,000 to Rp228,000 per cylinder, an increase of 18.75%. The hike, which took effect on April 18, marks the first adjustment since 2023.

According to information on the company’s official website, the Rp 228,000 price applies to Jakarta, Banten, West Java, Central Java, DI Yogyakarta, East Java, Bali, and West Nusa Tenggara. Prices in other regions are adjusted based on respective distribution costs.

In addition to the 12 kg LPG, the price of the non-subsidized 5.5 kg cylinder has also risen by 18.89%, from Rp90,000 to Rp107,000 in the same regions. This marks the first adjustment since November 2023.

At that time, the price of 12 kg LPG was actually reduced to Rp192,000 per cylinder, driven by a decline in the Aramco Contract Price (CPA) and a strengthening rupiah.

Data from Pertamina show that in Jakarta, Pertamax Turbo prices have risen to Rp19,400 per liter from Rp13,100, while Dexlite increased to Rp23,600 from Rp14,200 and Pertamina Dex to Rp23,900 from Rp14,500.

Meanwhile, Pertamax remains priced at Rp12,300 per liter and Pertamax Green 95 at Rp12,900. Subsidized fuels have also remained unchanged, with Pertalite at Rp10,000 per liter and Biosolar at Rp6,800.