Jakarta. Concerns over rising global crude oil prices have emerged following Iran's airstrike on Israel in response to an incident at the Iranian consulate in Damascus. Deputy of Economic Affairs of the Presidential Staff Office, Edy Priyono, said increasing subsidized fuel prices is the last resort option.

Edy explained that oil and gas price hikes often accompany escalating conflicts in the Middle East, with the impact contingent on the extent and duration of the conflict. 

"We hope the conflict between Iran and Israel does not escalate. The key lies with Israel, Iran, and neighboring countries, including the US and UK, to exercise restraint," Edy told Investor Daily on Tuesday.

Currently, global oil prices are nearing $90 per barrel, exceeding the assumption in the state budget of $82 per barrel for Indonesia's crude oil price. According to Edy, the government can still afford energy subsidies, including for fuels like Pertalite and Biosolar.

Edy said raising subsidized fuel prices is the last resort option, as it would affect the prices of goods and services overall. The government is preparing simulations for additional budget needs for subsidized fuels if global oil prices reach $100-110 per barrel.

"The increase in fuel prices is the last alternative. The health of the state budget and the government's fiscal capacity are crucial for our development continuity," Edy stated.

Edy added that the government's priority is to maintain subsidized fuel prices despite the rise in global oil prices. "We hope the increase is not too significant, so the cost of maintaining subsidized fuel prices is also not significant," he added.

The Energy and Mineral Resources Ministry reported that Indonesia's energy subsidies last year amounted to Rp 159.6 trillion, surpassing the target of Rp 145.3 trillion. However, energy subsidy realization in 2023 decreased compared to the Rp 174.4 trillion recorded in 2022.

Meanwhile, Chief Economy Minister Airlangga Hartarto said that Indonesia's economy remains relatively solid despite negative sentiment from the Israel-Iran conflict.

"Currently, Indonesia's economy is strong. Growth is maintained above 5 percent. The trade balance is still in surplus. Foreign exchange reserves remain strong above $136 billion. In the financial market, we see the Dollar Index strengthening against various countries. However, compared to other countries in Asia, Indonesia is doing better," he said during an Eid al-Fitr gathering in Jakarta, on Tuesday.

Airlangga said the government is currently monitoring the conflict escalation and will not rush into decisions.

"We haven't discussed the worst-case scenario yet. Of course, we're looking at various scenarios, but for now, we're monitoring the situation first. We must not overreact," he added.

Tensions between the two Middle Eastern countries escalated after Iran launched 30 missiles and drones at Israel on Saturday, seen as self-defense retaliation after Israel's attack on the Iranian consulate in Syria in early April.

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