To reduce subsidised fuel range, Indonesia announces ban on lower octane fuel sales from 2023

Earlier this week, the Indonesian government announced a price hike on subsidised fuels specifically, RON 90 Pertalite petrol and Solar diesel which are offered by the country’s state-run oil company, Pertamina.

As a result, a litre of Pertalite went up to IDR 10,000 (RM 3.01) from IDR 7,650 (RM 2.30) while a litre of Solar diesel now costs IDR 6,800 (RM 2.05), up from IDR 5,150 (RM 1.55).

The announcement saw protests against the price hike all over the country. In the wake of Pertamina’s announcement, a lower octane fuel offered by another provider was listed at a much cheaper price.

Also read: Oil-producing Indonesia confirms increasing subsidized RON 90 petrol to RM 3 per litre

Revvo 89 (RON 89) which is provided by Dutch-based oil producer Vivo retailed at IDR 8,900 (RM 2.69) per litre, a drop from IDR 9,290 (RM 2.80). As a result, consumers began to line up at Vivo petrol pumps which are fewer in number compared to Pertamina which also resulted in many pumps running dry of RON 89.

The Indonesian government had to intervene and ‘asked’ Vivo to adjust the price of Revvo 89 accordingly. A couple of days later, the petrol is priced at IDR 10,900 (RM 3.29) a litre.

Despite the price increase, oil-producing Indonesia still has one of the cheapest fuel prices in Southeast Asia behind Malaysia. Yet, the country’s subsidies are only provided to Pertamina fuels.

Also read: Indonesia’s national oil company Pertamina raises RON 92 petrol to RM 3.67 per litre

Indonesia has so far spent IDR 502 billion (RM 150 million) on subsidies alone this year, more than triple its initial budget. Aside from announcing price hikes, the government has also just announced the ban of lower octane fuels from 2023 or from 31-December 2022.

Also read: At RM 37.3 bil, Malaysia spends more on fuel subsidies than healthcare

This was confirmed by the Indonesian Ministry of Energy and Mineral Resources (ESDM) but there are no clear specifications on the minimum octane fuel allowed for sale. RON 89 isn’t the lowest octane available in Indonesia though as Pertamina also offers RON 88 which is known commonly as Premium.

However, Vivo Energy Indonesia gave a written statement to the Indonesian media stating that it will no longer offer Revvo 89 by the end of the year. Meanwhile, a Pertamina representative said that Premium 88 has been discontinued this year.

A representative from Indonesia’s oil and gas regulatory agency, BPH Migas, told CNBC Indonesia that the ban on lower octane fuels might also include RON 90 Pertalite. “We’re looking at sales of RON 91 and above,” the representative told the Indonesian news outlet.

If the ban of lower octane fuels does include RON 90, it will affect millions of Indonesians who mostly fill up with Pertalite. The national oil company rolled out a smartphone app for targeted fuel subsidies and thus far, around a million Indonesians have registered in the app.

Also read: Indonesia's Pertamina is testing smartphone app for targeted fuel subsidies