AN INPUT TO INDONESIAN FUEL PRICE SYSTEM REFORMS

This executive summary reviews international fuel pricing experiences to provide recommendations for Indonesia's 2015 fuel price system reforms. It analyzes how other emerging economies manage price volatility and suggests improvements in pricing formulas, regulatory functions, and non-pricing interventions to maintain fiscal savings while protecting vulnerable consumers.

• In January 2015, Indonesia implemented a new pricing system for diesel and gasoline to reduce fuel subsidy spending by passing international price increases to domestic consumers. This reform resulted in fiscal savings of IDR 195 trillion (US$ 15.6 billion) in the 2015 State Budget Revision, enabling increased infrastructure funding.
• Historically, Indonesia had some of the lowest fuel prices globally. As of November 2012, gasoline and diesel prices in Indonesia (both at US$ 0.47 per liter) were lower than those in all Southeast Asian peers and all BRICS nations, including Brazil, Russia, India, China, and South Africa.
• Public awareness regarding fuel subsidies in Indonesia is low; only 44% of citizens are aware that fuel is subsidized, and only 4% know the amount of government expenditure allocated to these subsidies.
• Good practice in fuel pricing involves four dimensions: subsidies (prices covering costs and using taxes for infrastructure/environment), pass-through (adjusting domestic prices for international costs and exchange rates), transparency (accessible information on price rules and components), and enforcement (consistent rules for non-compliance).
• Comparable countries use various mechanisms to manage price volatility. China uses a trigger based on a 10-day moving average and an adjustable fuel tax; India and Mexico gradually removed diesel subsidies through small monthly adjustments; the Philippines uses market-determined pricing with targeted cash transfers (4P program) for vulnerable groups; and Thailand utilizes an Oil Stabilization Fund (OSF) to smooth prices.
• To strengthen its system, Indonesia is advised to consider variable taxes to prevent prices from falling too low, linking price adjustments to absolute or percentage changes in world prices, and improving real-time monitoring to tackle non-compliance.
• Beyond pricing, the document suggests managing volatility by investing in supply efficiency (ports, transport, refining), reducing energy demand (public transport, urban planning, fuel efficiency), and providing targeted assistance to vulnerable groups such as transport operators via smart card systems.

APA

Beaton, C., Toft, L., & Lontoh, L. (2015). AN INPUT TO INDONESIAN FUEL PRICE SYSTEM REFORMS. International Institute for Sustainable Development. https://www.iisd.org/sites/default/files/gsi/ffs_indonesia_pricing_exec.pdf

Chicago

Beaton, Christopher, Lasse Toft, and Lucky Lontoh. AN INPUT TO INDONESIAN FUEL PRICE SYSTEM REFORMS. International Institute for Sustainable Development, 2015. https://www.iisd.org/sites/default/files/gsi/ffs_indonesia_pricing_exec.pdf.

Wikipedia

{{cite report |last1=Beaton |first1=Christopher |last2=Toft |first2=Lasse |last3=Lontoh |first3=Lucky |title=AN INPUT TO INDONESIAN FUEL PRICE SYSTEM REFORMS |publisher=International Institute for Sustainable Development |date=March 2015 |url=https://www.iisd.org/sites/default/files/gsi/ffs_indonesia_pricing_exec.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{beaton2015input, author = {Beaton, Christopher and Toft, Lasse and Lontoh, Lucky}, title = {{AN INPUT TO INDONESIAN FUEL PRICE SYSTEM REFORMS}}, institution = {International Institute for Sustainable Development}, year = {2015}, month = mar, url = {https://www.iisd.org/sites/default/files/gsi/ffs_indonesia_pricing_exec.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }