As Indonesia's oil production is expected to rise while a new oil refinery in Tuban (East Java) has started to come online, Indonesia's Ministry of Energy and Mineral Resources targets to stop imports of diesel fuel altogether and cut imports of gasoline fuel by 30 percent in 2016. The refinery in Tuban is owned by Trans Pacific Petrochemical Indotama, which was recently acquired by Indonesia's state-owned energy company Pertamina.

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The government of Indonesia decided to offer more attractive profit sharing schemes in order to lure investors to invest the nation’s oil & gas blocks. In September, the government plans to auction a total of eight oil & gas blocks with a profit sharing of 30 percent to 35 percent for oil, and 35 percent to 40 percent for gas. The majority of profit will still go to the government. Usually, the government offers a 15 percent profit share for oil and a 30 percent profit share for gas to investors.

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After a seven-year hiatus Indonesia will rejoin the Organization of the Petroleum Exporting Countries (OPEC) as a full member in December 2015. A statement on the website of the OPEC states that all members approved reactivating Indonesia’s full membership in the organization. At the next OPEC meeting, scheduled for 4 December 2015 in Vienna (Austria), Indonesia will be formally admitted back into the OPEC.

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Indonesia expects to produce between 800,000 and 830,000 barrels of oil per day (bpd) in 2016. This range was agreed during a working meeting between Commission VII (which oversees the country’s energy sector) of the House of Representatives (DPR) and the Energy and Mineral Resources Ministry. The meeting was held in the context of deliberations on the 2016 State Budget. So far this year, Indonesia’s crude oil output stands at an average of 802,046 bpd (monthly basis). Domestic demand, however, stands at 1.43 million bpd.

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Indonesian state-owned energy company Pertamina raised the price of pertamax, a 92-octane gasoline, by 2.3 percent per 1 May 2015 as the result of recovering global oil prices. On Java, Indonesia’s most populous island, the price of pertamax rose by IDR 200 to IDR 8,800 (USD $0.68) per liter. Outside Java, fuel prices are generally more expensive due to high logistics costs. The price of premium, the low-octane gasoline which was heavily subsidized until the start of the year, was left unchanged at IDR 7,400 (USD $0.57) per liter.

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Contrary to earlier reports the Indonesian government has not decided yet to completely phase out production and consumption of low-octane gasoline (known as premium) in Indonesia. Last week state-owned energy company Pertamina said that premium, a subsidized fuel that was introduced under the Suharto regime in order to support the population’s purchasing power (by making transportation costs artificially low) would be gradually replaced by 90-octane pertalite, a higher-grade fuel, starting from May 2015.

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Despite some protests in Indonesia’s capital city of Jakarta, the Indonesian government raised the price of subsidized low-octane gasoline (premium) from IDR 6,900 (USD $0.53) per liter to IDR 7,400 (USD $0.56) over the weekend (a 7.2 percentage point price increase). Meanwhile, the price of subsidized diesel (solar) was raised from IDR 6,400 (USD $0.49) to IDR 6,900 per liter (+7.8 percent). The price increase was considered necessary as crude oil prices had increased over the past month, while the rupiah continued to depreciate.

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The Indonesian government may raise the price of subsidized gasoline for April 2015 as the Indonesian Crude Price (ICP) rose through February and March from USD $52 per barrel to USD $57 per barrel based on data from the upstream oil & gas regulator SKK Migas. After the Indonesian government drastically reduced fuel subsidy spending at the start of 2015, subsidized gasoline prices are now set each month, in line with price fluctuations on the world market. For subsidized diesel the government provides a fixed IDR 1,000 per liter.

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Indonesia’s Commission VII of the House of Representatives (DPR) - the commission that oversees the country’s energy affairs - and the Indonesian Ministry of Energy and Natural Resources agreed on Wednesday (28/01) to set a 825,000 barrels per day (bpd) oil production target for 2015 in the Revised 2015 State Budget (APBN-P 2015), up from an estimated 794,000 bpd of realized production in 2014. Since its peak production of 1.6 million bpd in 1995, oil output of Indonesia (a former OPEC member) has declined drastically.

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Due to sharply fallen global crude oil prices the Indonesian government announced on Friday (16/01) that prices of fuels (low-octane gasoline and diesel) will be cut by an average of 14 percent, effective from Monday (19/01). The price of gasoline will drop 13 percent to IDR 6,600 (USD $0.53) per liter and diesel by 15 percent to IDR 6,400 (USD $0.51) per liter. Lastly, the government also reduced the price of Pertamina’s liquefied petroleum gas (LPG) by 4.2 percent to IDR 129,000 per 12-kilogram-cannister.

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While Indonesia was enjoying the Idul Fitri celebrations (marking the end of the holy fasting month), global financial markets experienced a massive shock. The panic was fueled by concern over a severe escalation of the Iran War after US President Donald Trump set a 48-hour deadline that would expire on 23 March 2026.

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The key story in March 2026 is obviously the Iran War that broke out after a United States (US)-Israeli coalition attacked various strategic assets in Iran starting on 28 February 2026, thus causing another (possibly long-term) geopolitical conflict after the Russo-Ukrainian War (2022-present) and Israel-Hamas War (2023-present).

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Few should be unaware that the world (particularly Western powers) are pushing for renewable energy to replace fossil fuels. It is difficult to find a newspaper or TV station that does not report on this issue on a daily basis.

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Just like essentially all other currencies around the globe, the Indonesian rupiah has been under pressure from tightening monetary policy in the United States (US). This has serious consequences for the energy market since Indonesia is a net oil importer.

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Besides the novel coronavirus (COVID-19) outbreak, another big news story in March 2020 was the massive decline of global crude oil prices. Not only is the price of oil under pressure because of the enormous slowdown in economic activity as various governments have imposed restrictions (such as travel bans) in an attempt to curb the further spread of the coronavirus, but there also emerged big tensions between some of the world’s biggest oil producers that led to tumbling oil prices.

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Foreign exchange earnings are important assets for a national economy. Therefore, many nations have recently been taking a much more protectionist approach vis-à-vis trade in an effort to strengthen their trade positions, generate trade surpluses, hence see the inflow of more foreign exchange earnings. Foreign exchange assets support a stable local currency as well as economy.

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Again, oil and gas contractors in Indonesia urge the government to clean up bureaucracy (red tape) in this sector in order to make the investment climate more attractive, and hence trigger more (much-needed) investment in Indonesia's oil and gas industry.

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Crude oil production at the Banyu Urip field (part of the Cepu Block) in East Java has reached 201,000 barrels of oil per day (bpd). This peak is reached about three years after operations started at the Banyu Urip field. Considering Indonesia set a 825,000 (bpd) oil production target in the state budget, it implies the Banyu Urip field now accounts for almost a quarter of total (targeted) crude oil production across Indonesia.

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An interesting interview with Lana Soelistianingsih was published in Indonesian tabloid Kontan, a magazine that focuses on the economy and financial markets of Indonesia. Soelistianingsih is Head of Economy at Samuel Aset Manajemen as well as a teacher at the Economics Department of the University of Indonesia. The topic of the interview is crude oil.

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Overall, low crude oil prices are problematic for stock markets as low prices indicate the world economy is not expanding on full throttle. This curbs investors' risk appetite. Particularly those companies that are active in the oil industry (or in related industries) will likely face declining share prices. However, there are also positive effects of low oil prices. For example consumers' purchasing power should improve because prices at the gas pump are lower, while some companies can curb operational costs. Hence, consumer and transportation stocks should actually benefit from low oil prices.

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