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Floating Pertamax prices may increase competition in unsubsidized fuel market
Now that the product’s retail price will follow the contours of global oil prices, Pertamina is expected to sell Pertamax at rates closer to other brands.
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Employees work at a gas station in Tangerang, Banten, on March 1, 2022.
(AFP/Adek Berry)
T
he government’s recent decision to sell “unsubsidized” Pertamax fuel at market prices will create a more level playing field with other brands, analysts say, as state oil and gas giant Pertamina will no longer be effectively subsidizing the product by selling it at an administered, often below-market price.
Now that the product’s retail price will follow the contours of global oil prices, Pertamina is expected to sell Pertamax at rates closer to other brands.
Ahmad Zuhdi Dwi Kusuma, an industry and area analyst at state-owned Bank Mandiri, said allowing the price of Pertamax to float would permit other brands to compete with it.
“Since the prices are not so different now, every brand can implement a marketing strategy to [compete with] Pertamax,” he said.
Indonesia’s largest fuel retailer cut the prices of its unsubsidized Pertamax and Pertamax Turbo gasoline brands on Tuesday to adjust to lower global crude prices. The change was called for under Energy and Mineral Resources Ministerial Regulation No. 11/2022 on the calculation of the retail price of fuel oil, which requires the government to make at least monthly adjustments to fuel prices to align with market movements.
Previously, the government had maintained an ambiguous price policy for its Pertamax brand. While the fuels sold under the brand did not receive direct subsidies from the government, Pertamina had been required to sell the fuels for much less than other products of the same octane level.
Mandiri's Ahmad estimated that Pertamina's losses in 2022 from selling Pertamax below its economic price were about Rp 12.7 trillion (US$814 million), assuming consumption for the entire year was 5.4 million kiloliters.
