JAKARTA — Finance Minister Sri Mulyani has delivered a stark assessment of the country’s fiscal outlook as global crude prices tumble. Every dollar decline in the price of a barrel of oil directly reduces government revenue, she warned, highlighting the arithmetic challenge facing the budget. Oil and gas royalties and income taxes typically account for more than one-third of Indonesia’s non-tax revenue. That income stream is now shrinking rapidly.
On 19 March, Brent crude fell to $26.17 per barrel, a price not seen since 2003. The drop followed Saudi Arabia’s decision to cut prices and increase production after Russia refused to agree to deeper cuts by OPEC.
For Indonesia, a net crude importer, the price collapse presents both an opportunity and a risk. President Joko Widodo, during a cabinet meeting on 23 March, directed ministers to reassess fuel subsidies and the state budget’s vulnerability to oil price fluctuations. A palace official quoted him asking “how long the dip might last.” The timing is critical because Indonesia sets subsidized diesel and 92-RON gasoline prices by government decree.
Any adjustment requires a 30-day public review period before taking effect. Energy Minister Arifin Tasrif told reporters on the same day: “We have instructed Pertamina to secure additional volumes for second- and third-quarter delivery.” Pertamina, the state oil company, typically imports between 300,000 and 400,000 barrels per day of sour crude suited for refineries designed for Middle Eastern grades.
Current Dubai cash differentials are at minus $5 to Brent. Traders estimate Pertamina saves approximately $12 on each imported barrel compared with January levels. Storage capacity, however, is limited.
“We will prioritise crude that can reach our ports within thirty days,” Tasrif said. On 20 March, the ministry instructed refiners to lift term contracts and spot cargoes as long as prices remain below $30 per barrel.
Jakarta is moving quickly to secure cheap barrels before the window closes. On the revenue side, the speed of response is far slower. Oil income vanishes the moment a cargo is priced.
Royalty payments shrink, tax receipts fall, and the budget deficit widens with every tanker arriving at a lower price. Sri Mulyani’s warning was not abstract—it was a statement of arithmetic.
Widodo aims to reduce Pertamina’s import bill and lower pump prices for consumers. That is the political objective. The fiscal cost is the trade-off.
The president ordered a recalculation of fuel subsidies, which are set by decree and adjusted periodically. A cut would be popular, but the revenue loss from the same price decline complicates the calculation.
Pertamina’s buying spree is already underway. The company can save roughly $12 per barrel compared with early 2020 levels. But those savings are not pure gain—they are offset by the drop in state income from domestic production. The budget depends on oil and gas revenues for a large share of non-tax income, and that share is now under pressure.
Jakarta’s strategy is clear: buy cheap crude now, worry about the budget later. The Energy Ministry has given refiners a green light to sign term contracts and acquire spot cargoes at current prices.
Tasrif said the government will “maximise purchases while the market is distressed.” That is a direct order. The question is how long the distress lasts, and whether the budget can absorb the blow. For now, the answer is to move barrels—fast.
