Aspebindo: State Budget at Risk as Oil Prices Surge Following Iran-Israel Conflict

TEMPO.CO, Jakarta - The Indonesian Association of Energy, Mineral, and Coal Suppliers (Aspebindo) warned that the surge in global oil prices due to the Iran-Israel conflict could exert significant pressure on the state budget. Aspebindo's Deputy Chair Fathul Nugroho believes that the situation could deliver a double blow to the national economy, which still depends on energy imports.

"Indonesia still imports around 813 thousand barrels of crude oil and petroleum products per day. When global oil prices rise, the impact is promptly felt on the oil and gas trade balance and burdens the state budget," said Fathul in a written statement on Monday, June 16, 2025.

According to Fathul, the assumption of oil prices in the 2025 state budget, set at US$82 per barrel, is now far behind the market price, which has reached US$88-90 per barrel. Because, Fathul said, every US$1 increase in Indonesian Crude Price (ICP) has the potential to add a subsidy and energy compensation burden of up to Rp1.5 trillion per year.

"This is a real fiscal risk that must be anticipated. The state budget could come under further pressure if oil prices continue to rise," he said.

Refinitiv data shows that Brent and WTI oil prices each surged around 10-11 percent in mid-June 2025, prompted by market concerns regarding the escalation of the Israel-Iran conflict.

Fathul stated that the current surge in oil prices is reminiscent of previous major crises. "It's not as severe as the Gulf War or the Arab-Israeli crisis before, but the signals are clear that dependence on imported oil makes us very vulnerable to external shocks," he said.

Amidst this situation, Fathul believes that the government's steps to accelerate energy self-sufficiency must be prioritized. He supports the measures taken by the Minister of Energy and Mineral Resources, Bahlil Lahadalia, in boosting national oil production and developing potential blocks such as the Rokan, Cepu, and frontier areas like Warim and Buton.

Fathul also emphasizes the importance of increasing fuel storage capacity and strategic petroleum reserves. Indonesia currently has operational reserves for about 22 days of consumption, far below the international standard of at least 30 days.

"If we have adequate strategic reserves, the government can be more flexible in absorbing stock when prices are low and be better prepared to face price surges like now," he said.

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