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View all search resultsFuel price hike in the cards if budget ‘can’t bear’ oil subsidy
Finance Minister Purbaya Yudhi Sadewa says the worst-case scenario of domestic crude averaging US$92 per barrel throughout the year could force the government to reduce fuel subsidies or cut spending elsewhere, such as on the free meals program.
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Flames and smoke rise from the Fujairah oil industry zone on March 4 in the United Arab Emirates. The fire was caused by falling debris after the interception of a drone by air defenses, according to the Fujairah media office, amid the United States-Israel war against Iran. (Reuters/Amr Alfiky )
T
he Finance Ministry is not ruling out the option of reducing fuel subsidies, should the state budget be unable to shoulder the pressure of high oil prices, as the Middle East conflict chokes supply.
Finance Minister Purbaya Yudhi Sadewa said in a media briefing on Friday that the government had not discussed a possible subsidy cut yet, but his office had mapped out scenarios.
“When the budget cannot bear [the subsidy] at all, there’s no other way; we have to share part [of the burden] with the people, meaning there’d be a fuel [price] increase, provided that the oil [price] goes really high,” said Purbaya.
Subsidized fuels are sold at fixed prices in the country thanks to the state budget covering the difference to typically higher market prices. An oil market price assumption is postulated in the budget plan, where the number serves as guidance for subsidy spending that year.
The minister revealed that, currently, “the worst-case scenario” was domestic crude averaging US$92 per barrel throughout the year, far above the $70 projection set in the macroeconomic assumptions of the 2026 budget.
The Brent crude oil price climbed 28 percent to $92.7 per barrel last week, and Qatari Energy Minister Saad al-Kaabi said the Gulf producers, responsible for a fifth of global supplies, might shut down within days, potentially driving crude prices to $150 per barrel, according to the Financial Times.
Asked whether subsidies would be cut as the global price is projecting a worse-case average figure, Purbaya neither confirmed nor denied the possibility.
