The Government and Pertamina Maintain Public Purchasing Power
Jakarta, April 11, 2022 – Amid world crude oil prices rise caused by the Russia-Ukraine conflict, the Government and Pertamina continue to maintain the public's purchasing power for economic growth continuity. The government has decided to continue helping the community by establishing Pertalite as a Special Assignment Fuel Type (JBKP). Therefore, the price remains affordable at IDR 7,650 per liter. Likewise, the government subsidizes biodiesel to keep the price at IDR 5,150 per liter.
As a state-owned company, Pertamina also contributes significantly to maintaining people's purchasing power by adjusting Pertamax price, which is still far below its economic price of around IDR 16,000. With the adjustment to IDR 12,500 per liter, Pertamina still bears the difference in Pertamax's selling price of IDR 3,500 per liter. Pertamina realizes that during the current global conditions, it still has to be a catalyst in encouraging national economic growth. One of them is by maintaining a balance between people's purchasing power and ensuring the company's financial capacity to ensure fuel supply to all Indonesians.
The amount of the Pertamax price adjustment by Pertamina has received appreciation and is considered by many parties to have weighed on the community because it is still far from economic value. As a State-Owned Enterprise (BUMN), Pertamina is aware of the people's purchasing power condition, so the Non-Subsidized fuel is not sold at high prices, taking the upper limit as determined in the formulation for determining General fuel price.
Historically, Pertamina's fuel prices have always been competitive or lower than other petrol stations operating in Indonesia.
For comparison, when Pertamax's (RON 92) price was adjusted, the price of similar fuel sold by other petrol stations, is far above Pertamina's, even more than IDR 16,000 per liter.
The price difference can also be seen for the Pertamax Turbo type of Non-Subsidized Fuel (RON 98). The price at Pertamina petrol stations is IDR 14,500 per liter, while other petrol stations sell for IDR 18,040 per liter.
Apart from the competitive fuel price, Pertamina's timing of fuel price adjustments is usually the latest. Other petrol station operators have made several price adjustments in the previous few months. As a state-owned company, Pertamina must take into account the fuel price adjustment carefully and with full consideration. Although it is the authority of each petrol station operator to adjust the price of non-subsidized fuel, Pertamina must consider the socio-economic factors of the community.
Many factors have pushed Pertamina to adjust non-subsidized fuel prices. First, global fuel and LPG prices have risen as a result of increased public activity and the worsening geopolitical situation between Russia and Ukraine, which has resulted in a reduction in crude oil supplies.
Second, Pertamax and Pertamax Turbo are non-subsidized fuels, which have only sold 14% of the total sales volume of all Pertamina fuel types. Most of those who buy are also wealthy people who use luxury vehicles. Before the pandemic, this Pertamax Series price followed the market price. Thus, as the national economy recovers, Pertamina makes adjustments.
Globally, fuel and LPG prices in Indonesia are among the cheapest in the world because they are subsidized by the government. Apart from 3 kg LPG, Biosolar and Pertalite price is also maintained to be stable and no increase. It is to support efforts in stabilizing the national economy and avoid an increase in logistics prices, both in goods and people transportation, considering that these two types of products are the most consumed fuel by the public or 83% of all Pertamina retail fuel total sales.
"Both Biosolar and Pertalite are fuel types that receive support from the Government of subsidies or compensation so that the price is fixed," explained Fajriyah.
As it is known, for every 1 liter of Biosolar that the public buys, the government provides a subsidy of IDR 7,800. The value of this subsidy is 150%, or 1.5 times higher than the price sold to the public of IDR 5,150.
Meanwhile, for every 1 liter of Pertalite purchased by the public, the government provides a subsidy of IDR 4,000-4,500 per liter. The value of this subsidy is also greater than 50%, or half, of the selling price of IDR 7,650.
If we compare the average fuel price in Asia, the price in Indonesia is still the lowest. The highest average fuel price in Singapore is IDR 30,208 per liter, followed by Laos IDR 24,767 per liter, the Philippines IDR 20,828 per liter, Cambodia IDR 20,521 per liter, Thailand IDR 19,767 per liter, Vietnam IDR 18,647 per liter, and Indonesia an average of IDR 16,500 per liter.
Below Indonesia, there is Malaysia, whose fuel prices are relatively lower due to differences in the value of subsidies.
Meanwhile, if we examine fuel prices in developed countries, it is much higher. The highest prices were Hong Kong IDR 36,176 per liter, Finland IDR 34,741 per liter, Germany IDR 34,454 per liter, Italy IDR 34,510 per liter, Norway IDR 33,162 per liter, Netherlands IDR 33,018 per liter, Greece IDR 32,733 per liter, and Portugal IDR 31,728 per liter. The price is based on the exchange rate of IDR 14,357 per US dollar.
Referring to the data and facts above, it is natural for many parties to say that Pertamina's fuel prices are still the lowest. And it is not only fuel but also LPG. For every 3 kg LPG cylinder purchased by the public, the government provides a subsidy of IDR 33,750. The value of this subsidy is also higher than the selling price of the LPG to the public.
For information, as of February 2022, the selling price of LPG in Singapore is around IDR 32,000/kg, the Philippines is around IDR 27,000/Kg, and Vietnam is around IDR 24,000/Kg. For Thailand, the LPG price is IDR 10,000/Kg and Malaysia IDR 6,500/Kg, because the price of LPG in these two countries is currently subsidized by the government.**