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Jakarta Post

The dilemma of energy subsidies

Jakarta   /   Fri, March 9 2018   /  01:21 am

Low international oil prices over the past three years have greatly helped President Joko “Jokowi” Widodo to maintain prudent fiscal management, enabling him to slash fuel energy by one-third only one month after his inauguration in October 2014, and invest the annual savings of US$15 billion in infrastructure development.

Given the high volatility of oil prices and Indonesia’s position as a net oil importer with a daily import need of more than 800,000 barrels of oil (bbl), the period of low oil prices (below $50/bbl), which lasted until the end of 2017, has indeed been highly fortuitous for the Jokowi administration.

But the oil factor has now increasingly become a dilemma, both politically and economically, as oil prices have been hovering above $60 since early this year and seem most likely to rise steadily. A prudent fiscal rule would require the government to r...