Pertamina said on Thursday evening that prices of the high-grade RON 92 fuel would be raised to between Rp 12,500 (87 US cents) and Rp13.000 per liter, from the previous range of Rp 9,000 and Rp 9,400 per liter, depending on the region.

The company noted that despite the increase, prices were still below the economic value of Rp 16,000 per liter given that crude prices were averaging US$100 a barrel. The value was based on Energy and Mineral Resources Ministry estimates.

“Pertamax price adjustment is still Rp 3,500 lower than its economic value. We’re doing this to not burden consumers too much,” Irto Ginting, corporate secretary of Pertamina fuel distributor subsidiary PT Pertamina Patra Niaga, said in the statement.

Read also: Pertamina raises LPG price, mulls hiking gasoline price

This is the first time in two years that Pertamina has raised Pertamax prices, a move made to adjust to soaring global crude costs. International crude benchmark Brent has gained 38.7 percent year-to-date to $107.91 a barrel as of March 31, according to Business Insider data.

The Indonesian Crude Price (ICP) stood at $114.55 a barrel as of March 24, from the average of $110.14 a barrel in the previous month, as a result of the Ukraine-Russia conflict, which exacerbated an ongoing rise in oil prices amid a global economic recovery, the energy ministry said.

Pertamina competitor Shell Indonesia has been selling a similar grade fuel at Rp 12,990 per liter and British Petroleum (BP) at Rp 12,500 per liter, since March 1.

The State-Owned Enterprises (SOE) Ministry previously signaled that Pertamina might raise the price of its unsubsidized Pertamax brand of gasoline on Friday to minimize losses from the widening gap between retail prices and economic prices.

  

Read also: Oil price increase calls for bold reform of fuel-subsidy policy

 

SOE Ministry spokesman Arya Sinulingga said on Tuesday that holding onto current Pertamax prices was like subsidizing luxury cars as most Pertamax buyers were luxury car owners.

 

Pertamax accounts for 13 percent of total gasoline consumption in Indonesia, according to Pertamina data from 2020. Top-grade fuel Pertamax Turbo accounts for 1 percent, lowest-grade fuel Premium 23 percent and Pertalite – the most popular gasoline in Indonesia – accounts for 63 percent

 

“Pertamina should calculate thoroughly so that it is no longer subsidizing luxury cars through Pertamax,” Arya said in a video statement.

 

Pertamina president director Nicke Widyawati in a hearing with House of Representatives Commission VI overseeing trade, industry and SOEs on Monday asked the House to support the company in bringing Pertamax retail prices closer in line with market prices.

 

Commission VI deputy chair Aria Bima, also on Monday, declared the commission's support for Pertamina to raise fuel prices "to guarantee Pertamina's financial health in executing government programs".

 

Previous price policies

 

Pertamina on March 3 officially raised the prices of three types of nonsubsidized fuels, namely Pertamax Turbo, Dexlite and Pertamina Dex from the previous Rp 13,500, Rp 12,150 and Rp 13,200 per liter to Rp 14,500, Rp 12,950 and Rp 13,700 per liter, respectively. Pertamax Turbo is the highest-grade fuel sold en masse by Pertamina.

 

However, the government retained the price of Pertalite, which is the company's most popular fuel, at Rp 7,650 per liter. Pertalite is the second-lowest grade fuel after Premium.

 

The energy ministry recently chose Pertalite to replace Premium as a Type of Fuel for Special Assignment (JBKP) through Regulation No. 37/2022. This means Pertalite can be subsidized by the government through a compensation scheme for Pertamina.

 

The policy is meant to keep Pertalite affordable even as Pertamina raises the price of higher-grade fuel. The Pertalite quota is set at 23.05 million kiloliters (kl) for this year.

 

Read also: Sri Mulyani says high oil prices weighing on state budget

 

Finance Minister Sri Mulyani Indrawati on Tuesday also suggested that the Pertamax price increase and swelling fuel and electricity subsidies, caused by soaring global oil prices, had taken a toll on the state budget. The government allotted Rp 134 trillion for energy subsidies this year.

 

“Pertamax may be affected by the crude oil price hike because it is specified as a nonsubsidized fuel and is purchased by higher-income consumers,” she said.

The finance ministry seeks to minimize state spending by reinstating a budget deficit cap of 3 percent of gross domestic product (GDP) by 2023 as per existing regulations.

 

Finance Ministry data from Monday shows that energy subsidy spending in the first two months of 2022 had reached Rp 11.48 trillion, exceeding the pre-pandemic level of Rp 10.73 trillion during the same period in 2019. On top of subsidies, the government typically compensates Pertamina for losses from certain types of sales and owes Pertamina some compensation fees from last year.