What Kadin Recommends to Handle Rising Oil Prices

TEMPO.CO, Jakarta - Director of Insight at the Kadin Indonesia Institute, Fakhrul Fulvian, stated that global oil prices approaching US$100 per barrel make the B50 biofuel agenda increasingly strategic.

The Kadin Indonesia Institute views B50 not merely as an energy policy and import substitution measure, but as a catalyst for transforming domestic industry and strengthening Indonesia's balance of payments.

According to Fakhrul, government estimates indicate that implementing B50 could displace roughly 18 million kiloliters of imported diesel and yield foreign exchange savings of approximately Rp170 trillion. Consequently, Fakhrul noted that these savings would lessen Indonesia's vulnerability to oil price volatility and reduce dependence on external financing.

“So far, when the balance of payments comes under pressure, discussions heavily center on how to draw dollars into Indonesia. B50 operates in the opposite direction, curbing dollar outflows while converting domestic resources into national energy capacity,” he said in a written statement released on Friday, September 11, 2026.

He emphasized that the next challenge is ensuring that the domestic demand generated by B50 fosters a new industrial ecosystem, ranging from refining, storage, terminals, blending, logistics, engineering, testing, to domestic equipment manufacturing.

“We must not only replace imported diesel with domestic feedstock. The benchmark of industrial transformation lies in how much new engineering, technology, logistics, and industrial capabilities are ultimately built within Indonesia,” he added.

Therefore, Fakhrul stated that the Kadin Indonesia Institute is advocating for the formulation of a B50 Industrial Transformation Roadmap. The framework would not only establish blending targets, but also map out the development of feedstock, refining capacity, distribution infrastructure, machinery readiness, domestic equipment, and advanced biofuels such as sustainable aviation fuel.

Fakhrul stressed that B50 implementation must account for end-user sectors, including mining, plantations, trucking, shipping, and heavy-equipment industries. He urged the government to monitor fuel efficiency, maintenance expenses, operational downtime, and equipment reliability following the rollout.

“The foreign exchange savings are substantial, but we must ensure there are no hidden costs in the form of elevated maintenance, downtime, or reduced productivity. B50 must be evaluated based on its net economic benefit for Indonesia,” he said.

State Budget Pressures and Subsidized Fuel

Separately, Minister of Energy and Mineral Resources Bahlil Lahadalia responded to global oil prices exceeding US$108.68 per barrel. Bahlil acknowledged that the uptick in crude prices continues to strain state finances.

“This is certainly not a light matter. It is heavy, as subsidy expenditures will undoubtedly rise,” Bahlil told reporters at his office in Jakarta on Friday, September 11, 2026.

He noted that with global oil prices surpassing US$100 per barrel, the average Indonesian Crude Price (ICP) pegged in the 2026 State Budget from January to September sits between US$80 and US$90 per barrel. The benchmark ICP set in the 2026 State Budget is US$70 per barrel.

Calculations by the Coordinating Ministry for Economic Affairs indicate that every one-dollar increase in the ICP adds Rp10.3 trillion in oil spending.

Conversely, a US$1 per barrel increase boosts state revenues by approximately Rp3.6 trillion, derived from non-tax state revenues (PNBP) in the oil and gas sector.

Nevertheless, Bahlil reaffirmed that the government will not raise subsidized fuel prices. He explained that under President Prabowo Subianto's direction, keeping subsidized fuel prices stable aims to protect public purchasing power.

“President Prabowo believes that safeguarding the purchasing power of lower- and middle-income groups is far more important, even amid the measures we must undertake. Expanding the subsidy budget, I think, is part of the steps we take,” Bahlil said.

Nandito Putra contributed to this article

Read: IHSG Down 1.43 Percent on Rising Oil, Fed Fears

Click here to get the latest news updates from Tempo on Google News