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Jakarta Post

Analysis: Reducing Indonesia’s dependency on fuel oil

  • Adjie Harisandi

    Mandiri

Jakarta   /   Wed, October 17 2018   /  03:18 am

Indonesia has an ambition to reduce its dependency on fuel oil. In its General Planning for National Energy (RUEN), the government set a target to reduce the proportion of fuel oil in Indonesia’s energy mix to 25 percent by 2025, from 46 percent in 2015. Should the government manage to fulfill the target, it will have a positive effect on Indonesia’s economy.As a net oil importer, Indonesia is more vulnerable to external shocks, such as the high volatility of the international crude oil price and exchange rate. Only by achieving the energy mix target can Indonesia significantly diminish the impact of these shocks in the future.Yet, achieving the target is not as easy as it seems. The government’s current policy on the domestic fuel oil price tends to incentivize consumption, as the pegged fuel oil price is set relatively low compared to its market price. This policy has meant that ...