Pertamax Dilemma: Assessing Spillover Inflation and Consumer Substitution in Indonesia

The price of Pertamax varies across the Archipelago. Based on the price list released by Pertamina Patra Niaga, which is the subsidiary of Pertamina engaged in fuel trading, Pertamax is most affordable in the Free Trade Zone of Sabang (IDR 15,250 per liter) while it is most expensive in the Provinces of West Sumatra, Riau, Riau Archipelago, South Kalimantan, and North Kalimantan (IDR 17,000 per liter). In most other provinces it ranges between IDR 16,250 and IDR 16,650 per liter.

The reason behind the Pertamax price hike is clear. Roberth Dumatubun, Corporate Secretary at Pertamina Patra Niaga, stated that the price adjustment was made in coordination with the government after a periodic evaluation mechanism that takes into account developments in global oil prices and economic market prices.

In other words, considering global oil prices have remained high (not far from USD $100 per barrel), while Indonesia is a net oil importer that subsidizes a significant chunk of domestic gasoline consumption, pressures on the state budget have risen heavily since the start of the Iran War in late February 2026. Moreover, the rupiah has been fragile, recently touching a historic low at nearly IDR 18,200 per US dollar, making it even more expensive to import oil from abroad.

Table 1 - Fuel Prices in Indonesia (Prices on Java):

Fuel Type	18 April 2026 (Rupiah per Liter)	10 June 2026 (Rupiah per Liter)
Pertalite	10,000	10,000
Pertamax	12,300	16,250
Pertamax Green 95	12,900	17,000
Pertamax Turbo	20,750	20,750
Dexlite	23,000	23,000
Biosolar	6,800	6,800

^{Source: Pertamina Patra Niaga} 

Indeed, the Indonesian government earlier emphasized that subsidized fuel prices only (namely Pertalite and Biosolar) would be frozen until the end of 2026. However, it was assumed that the government would be very careful with the Pertamax price too considering a significant portion of the market uses Pertamax. Therefore, if the price of Pertamax rises, then a portion of Pertamax users is likely to switch to Pertalite. This would add even more pressures on the government's state budget deficit as the government pays a heavy compensation/subsidy for every liter of Pertalite that is sold.

While Pertamina has become more strict in terms of monitoring Pertalite consumption at the gas stations (for example, one's vehicle must be registered in the government's Subsidi Tepat database to buy Pertalite using a unique QR code tied to the license plate), it remains easy to sidestep such monitoring as one can buy Pertalite at the numerous informal shops (roadside vendors) that are found next to busy streets. In fact, many people may blend Pertamax (RON 92) with Pertalite (RON 90) in an effort to save money --a decision that is certainly not good for the car's engine (blending lowers the octane level, causing engine knocking, incomplete combustion, and long-term damage to the catalytic converters --ultimately costing the consumer more in repairs than they save at the pump).

Pertamax is not categorized as a subsidized fuel but the Indonesian government does keep the price of Pertamax artificially low and therefore pays compensation to Pertamina for selling the fuel below market prices (these compensation payments are therefore 'hidden' subsidies). So, when the government kept Pertamax at IDR 12,300 over the past two months (despite high global oil prices), we assumed that this price would be kept low in the foreseeable future. But apparently this populist scheme had to be abandoned as pressures on the state budget became too high.

Through subsidies and compensation payments the Indonesian government keeps fuel and electricity prices low in an effort to support the poorer segments of society. It is estimated that nearly half of the Indonesian population lives in near-poor conditions, implying a significant inflationary shock can push them into full-blown poverty.

Besides the looming increase in Pertalite consumption that burdens the state budget, the heavy Pertamax price increase risks squeezing the aspiring middle class segment of Indonesia. Many Pertamax consumers are small business owners, ride-hailing drivers and urban working class (who are not beneficiaries of the government's social assistance spending). And so, if they continue to use Pertamax then their disposable incomes become eroded. This can even push them into the near-poor category.

The table below shows the average of fuel prices in ASEAN countries (based on the March-April 2026 trading Economics data). Indonesia is near the bottom of the list. The significant differences in countries' fuel prices is explained by differences in energy subsidy policies, tax structures and each country's ability to produce domestic oil and fuel.

Table 2 - Average Gasoline Price in ASEAN Region:

Country	Average Retail Gasoline Price (US Dollar per Liter)
Singapore	2.38
Philippines	1.52
Cambodia	1.25
Thailand	1.25
Vietnam	0.74
Indonesia	0.59
Malaysia	0.50

^{Source: Bisnis Indonesia}

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