Pertamina, Indonesia's state-owned oil and gas company, raised the retail prices of two grades of non-subsidised gasoline by approximately 32% [1].
The price adjustment reflects the pressure of surging global energy costs on the Indonesian economy. By targeting non-subsidised fuels while keeping subsidised rates unchanged, the government aims to balance fiscal stability with the need to protect lower-income citizens from sudden cost-of-living spikes.
The price hike became effective on May 4, 2026 [2]. This represents the first increase in fuel costs since the beginning of the Iran war, a conflict that has contributed to a global oil price surge of roughly 50% [3].
In a statement, Pertamina said the company has raised prices of several non-subsidised fuel products effective Monday [2]. The move is intended to align domestic retail costs with the current global market environment.
Government officials expressed confidence that the adjustment would not trigger a widespread economic shock. Indonesia's Finance Minister said, "There will be limited impact on inflation" [1].
Despite the hike for premium grades, the government continues to maintain subsidies for widely used fuels. This strategy is designed to limit the direct impact on the general population and reduce the risk of social unrest often associated with energy price volatility, a common challenge in the region.
The decision comes as economists monitor the sustainability of Indonesia's subsidy regime. While the government maintains that the current approach is manageable, the disparity between global market prices and subsidised domestic rates continues to grow as global costs rise [3].
“Pertamina raised the retail prices of two grades of non-subsidised gasoline by approximately 32%.”
This strategic price split allows the Indonesian government to partially offset the costs of a 50% surge in global oil prices without triggering the mass inflation or public protests typically caused by removing general fuel subsidies. However, the reliance on subsidies for the majority of the population creates a growing fiscal burden that may become unsustainable if the geopolitical instability surrounding the Iran war persists.
