Long lines at an Indonesian gas station following a government plan to raise gas prices in 2012. The plan was eventually scrapped after mass riots broke out.
Most Indonesians rely on their motor vehicles to get around since there are no other mass rapid transit system available as alternatives. The sales of motor vehicles have been growing every year while the number of vehicles the roads can handle has stayed the same, resulting in traffic jams in major cities.
The government also heavily subsidizes fuel for motor vehicles, without which inflation and then mass riots would run rampant in the country.
There are a bunch of gas stations at every corner in Indonesia dominated by Pertamina, the state-owned oil and gas corporation, and some owned by Shell Indonesia, the Indonesian subsidiary of the world renowned Royal Dutch Shell.
The competition between gas stations is increasingly fierce in Indonesia. A lot of them offer loyalty incentives to woo customers. One example is to offer free bottled drinks per 150,000 rupiah (USD 1 = IDR 9,600.00) purchase of gasoline.
One of the gas stations owned by Pertamina
From Detik:
European Energy Experts “Shaking Their Heads” Seeing Fuel Subsidy in Indonesia
Jakarta – European energy experts never knew that the fuel subsidy provided by the Indonesian government to its 248 million people reaches 300 trillion rupiahs (USD 31.4 billion). This subsidy is too large.
“The European energy experts and scientists were shaking their heads looking at the amount of energy subsidies which include fuel. They shook their heads because they knew that Indonesia does not have plenty of oil and is not a rich country either but still gives huge oil subsidies,” said Deputy Minister of Energy and Mineral Resources, Rudi Rubiandini, inside the office of the Ministry of Energy and Mineral Resources in Jakarta on Wednesday (5 September 2012).
Rudi revealed that European countries do not give gasoline subsidies to their people. For example, in Norway the fuel price there when converted to Indonesian rupiah is equal to 24,000 rupiahs per liter [USD 2.51/L or USD 9.50/gallon].
Gas prices, in rupiahs per liter, for different fuel types in Indonesia
“In Norway the gasoline price is IDR 24,000 per liter. From that price, IDR 16,000 [USD 1.67/L or USD 6.32/gallon] is the base price and IDR 8,000 [USD .84/L or USD 3.18/gallon] is the tax. So there isn’t single penny of state subsidies in each liter,” said Rudi who also recently returned from his trip from Norway and Germany.
Comparing the price in Indonesia, premium gasoline is IDR 4,500 per liter [USD .47/L or USD 1.78/gallon], [so] the subsidy is almost IDR 4,500 per liter [USD .47/L or USD 1.78/gallon].
“The original price for premium is around IDR 9,000-10,000 per liter [USD .94-1.05/L or USD 3.56-3.97/gallon], but the government sold it for IDR 4,500 per liter [USD .47/L or USD 1.78/gallon]. It means that the government is subsidizing IDR 4,500 per liter,” he said.
The subsidy that reaches IDR 300 trillion [USD 31.4 billion] is of course a huge amount. According to Rudi, rather than burning the fuel for vehicles, it would be nice if some of the subsidies were used to build other renewable and clean energy infrastructure.
Prices at Shell gas station in Indonesia
Comments from Detik:
myobokuzan:
Energy experts shake their heads watching how large the fuel subsidies are while the Indonesian people shook theirs when subsidies were about to be reduced.
Rezana Incorporezano:
It’s hard not to shake their heads when people even use motorcycles to go to a small shop 5 meters away to buy cigarettes.
Albatahan:
It’s all wrong. It’s wrong to subsidize gasoline. It’s wrong to not subsidize it. Oh Indonesia, you have a bitter fate.
D34th:
People are also shaking their heads wondering if the 300 trillion rupiahs are really spent for subsidizing fuel [as oppose to being embezzled in corruption]….Ckckckckckckck …
Agun Haniffaqih Black:
They should’ve shaken their heads knowing the average salary [per month] of Indonesians is only enough to buy 50 liters of gas. They should’ve thought of that first!!!
Qualitoos:
The DEMOKARAT party has to be responsible for wasting the fuel subsidy budget, for playing around with the fuel prices, and for increasing the national debt to nearly 2000 [trillion rupiahs] (209.1 billion USD) ..
Qualitoos:
This is the IMPACT of President Susilo Bambang Yudhoyono (SBY) lowering fuel prices just for the election. His reasoning was due to the drop in world oil prices. We must admit that it’s not easy to re-raise fuel prices again..
Pare Holic:
Remove the fuel subsidy. Build roads, railways, MRT [Mass Rapid Transit] or other public transportation systems that are needed instead. This country will go bankrupt…
zero2789:
Iran and Iraq, which are rich in oil, already removed their oil subsidies… They diverted their subsidy money for drilling wells, building new refineries and new infrastructures…
tri2008:
We can’t compare Indonesia to European countries with their high per capita income..
Sutan Hutagalung:
Try not to see the amount of subsidies but see the reason for the subsidies instead .. First of all, majority of earnings from oil are already taken away by foreign oil contractors ..
sri_s:
300 trillion rupiahs can be used to pay for the less fortunate people if [the government] does care for its people.
paribas:
Wowww .. if only those men knew the amount of money that was embezzled in corruption, they would shake their heads off…
ambumu:
Those energy experts should have compared the amount for the subsidy to the amount lost through corruption…..
sumanuk:
300 trillion rupiahs are better off being embezzled than being used as a subsidy.
SokoLele:
This guy “talks with his brain in his knee” [not thinking through what one’s talking] … the best [solution] is to cut the salaries and bonuses for the president and our outlaws…oh I meant our officials.
adilgustiwan:
Is there already a safe, convenient, timely, affordable public transportation system in this country? Unless it exists, people will be more than willing to get stuck in traffic jams ..
tukang_ngamat_politik:
The European experts would have banged their heads against the wall instead of shaking them had they seen the wonder of our public officials’ wealth…
Bred Piet Sandaljepit:
EVERYBODY KNOWS THAT THE GOVERNMENT IS NOT WILLING TO REMOVE THE FUEL SUBSIDY BECAUSE THEY’RE AFRAID THEY WON’T GET RE-ELECTED IN 2014.
What do you think about the fuel subsidy in Indonesia? Should the government remove it or maintain it?
