Who Pays for the Hormuz Shock? Why Indonesia Is Keeping Fuel Prices Frozen

Since the conflict in the Persian Gulf began in February, Indonesia has kept the price of its most widely used subsidised gasoline unchanged at Rp10,000 per litre, or roughly US$0.55.

Over the same period, the global oil market has experienced considerable volatility. Indonesia's benchmark crude price, known as the Indonesian Crude Price (ICP), climbed from US$68.79 per barrel in February to US$112.81 in September.

Brent crude has since retreated to around US$97 as shipping activity through the Strait of Hormuz approaches normal levels. But the financial consequences of the disruption have not disappeared. They have simply shifted elsewhere, largely onto the government budget and the balance sheet of Indonesia's state-owned energy company, Pertamina.

This raises a bigger question: when a geopolitical crisis thousands of kilometres away pushes up global energy prices, how does Indonesia prevent that shock from reaching consumers, and who ultimately pays the difference?

The Strait of Hormuz: A Small Passage With Global Consequences

The Strait of Hormuz connects the Persian Gulf with the Gulf of Oman and the Indian Ocean. Despite its relatively narrow geography, it is one of the most strategically important shipping routes in the global energy market.

A significant share of the world's oil supply passes through this corridor every day. Roughly one-fifth of global oil consumption normally travels through the strait, making it a critical link between major Middle Eastern oil producers and international markets.

Saudi Arabia, the United Arab Emirates, Kuwait, Iraq and Iran all rely heavily on this route to transport crude oil to international buyers.

The situation deteriorated sharply after the United States and Israel launched an air campaign against Iran on February 28, 2026. Shipping activity was subsequently disrupted by military tensions, attacks and vessel seizures. The United States also imposed a blockade on Iranian ports between April 13 and May 29.

For countries that depend on imported energy, the consequences extended far beyond the Middle East. Higher oil prices, more expensive shipping and increased insurance costs quickly became a global economic concern.

Hormuz Is Reopening, But the Oil Market Has Not Fully Recovered

Recent developments suggest that conditions in the Strait of Hormuz are gradually improving. Oil shipments through the passage have reportedly returned close to normal levels, helping ease some of the pressure on global crude prices.

On November 4, Brent crude fell to approximately US$94.60 per barrel before recovering to around US$97.10 the following day. Just two weeks earlier, on October 21, prices were still hovering around US$108.

However, measuring the recovery is not straightforward.

An earlier estimate cited in a Wall Street Journal report placed oil flows through Hormuz at approximately 14 million barrels per day, equivalent to around 82% of pre-conflict levels. This estimate also accounted for ship-to-ship transfers in the Gulf of Oman.

Other analysts have suggested that total crude exports from the wider Gulf region have already exceeded their pre-conflict levels. One reason is that Saudi Arabia and the United Arab Emirates have redirected a portion of their exports through overland pipelines, allowing them to bypass the strait.

These figures are not necessarily contradictory. One measures the volume of oil moving through Hormuz, while the other considers total exports from the broader region.

Even with shipping activity improving, the oil market has not returned to normal. Freight rates and war-risk insurance premiums remain elevated. Some analysts believe that logistical constraints and continuing military risks are keeping prices higher than they would otherwise be.

There is also an important distinction between crude oil and refined petroleum products. As CNBC Indonesia reported in early October, crude exports had largely normalised, while supplies of refined fuel products were still experiencing disruption.

In other words, reopening a shipping route does not immediately restore the entire energy supply chain.

How Global Oil Prices Reach Indonesian Consumers

Indonesia is particularly exposed to movements in the international oil market because it imports approximately one million barrels of oil per day, according to Energy Minister Bahlil Lahadalia.

When global prices rise, the cost of securing energy supplies increases. That creates additional pressure on both the domestic fuel market and the government budget.

The challenge becomes more significant when actual oil prices move far beyond the assumptions used to prepare the national budget.

Indonesia's 2026 state budget was built around an average oil price assumption of US$70 per barrel. However, the Indonesian Crude Price moved considerably above that level during the conflict.

The ICP increased from US$68.79 in February to US$102.26 in March. It subsequently eased to US$89.43 in August before climbing again to US$112.81 in September.

The October figure is expected to be released in mid-November.

Despite these increases, the impact on consumers has been uneven because Indonesia operates two different fuel pricing systems.

Non-subsidised fuel follows market conditions.

Pertamina, Indonesia's state-owned oil company, has adjusted prices several times throughout 2026, including on March 1, April 18, May 4 and September 2.

Pertamax, the company's RON 92 gasoline, remained at Rp12,300 per litre in April and May but has since increased to Rp15,950.

Subsidised fuel remains protected.

The prices of Pertalite gasoline and Biosolar diesel have remained unchanged since the conflict began. Both the government and Pertamina have stated that these prices will not increase before the end of 2026.

This distinction is central to understanding Indonesia's response. While some consumers are already paying more for fuel, millions of others remain protected from the full impact of rising global energy prices.

What Fuel Actually Costs in Indonesia

As of November 6, 2026, the following are Pertamina's fuel prices in Greater Jakarta, including the applicable 5% regional fuel tax.

Dollar conversions use an approximate exchange rate of Rp18,140 per US dollar. Prices in other regions may vary slightly.

Interestingly, some non-subsidised diesel prices have actually declined compared with early May. Dexlite, for example, previously reached Rp26,000 per litre, while Pertamina Dex was priced at Rp27,900.

Indonesia's subsidised gasoline also remains relatively inexpensive compared with neighbouring countries.

An industry comparison published by Industry.co.id found that Indonesian subsidised gasoline costs approximately US$0.55 per litre, compared with US$1.51 in Thailand and US$2.48 in Singapore. Among the countries included in the comparison, only Malaysia had a lower gasoline price.

For households and businesses that depend heavily on transportation, these differences are significant.

But keeping prices low does not mean the underlying cost of energy has disappeared.

The Hidden Cost of Keeping Fuel Prices Low

When consumers pay less than the economic cost of fuel, someone else has to cover the difference.

In Indonesia, that responsibility is shared between the national budget and Pertamina.

The government provides direct fuel subsidies and compensation payments to Pertamina. The latter covers the difference between the regulated selling price and the economic price of fuel that the company is required to supply.

A report on the state budget, APBN KiTa, cited by Indonesian media in May, recorded Rp118.7 trillion in energy subsidies and compensation spending, equivalent to approximately US$6.5 billion.

This consisted of:

• Rp52.2 trillion in direct energy subsidies.

• Rp66.5 trillion in compensation payments to Pertamina.

The combined figure represented a 266.5% increase compared with the same period a year earlier.

These figures reflect an earlier reporting period, rather than the full financial impact of the conflict. The latest government budget report is needed to establish how much the burden has increased since then.

One estimate circulating in financial commentary suggests that every US$1 increase in crude oil prices could add approximately Rp6.8 trillion to government spending.

That figure should be treated as an estimate rather than an official government projection.

The policy itself has generated different opinions among economists and market observers.

Commodity analyst Wahyu Tribowo Laksono has warned that maintaining artificially low fuel prices carries significant fiscal risks. The central question, in his view, is how much additional pressure the government budget can absorb.

Fahmy Radhi, an energy economist at Gadjah Mada University, has offered a different perspective on one aspect of the policy. He argued that maintaining Pertamax prices in April also served a practical purpose.

If Pertamax had become significantly more expensive, consumers might have switched to Pertalite in large numbers, increasing demand for subsidised fuel and potentially expanding the government's subsidy obligations.

Both arguments highlight the complexity of fuel pricing. A decision that protects consumers in the short term can create financial pressure elsewhere in the economy.

Four Things That Could Change Indonesia's Fuel Outlook

The future of Indonesian fuel prices will depend on several developments beyond the country's control.

1. US-Iran negotiations

Qatar has been acting as a mediator in diplomatic efforts between the United States and Iran. According to SINDOnews, Iran has submitted a nuclear proposal containing seven conditions.

At the same time, former Israeli prime minister Ehud Barak has warned that Benjamin Netanyahu could consider another strike against Iran to disrupt the formation of a new Israeli government.

Barak's statement represents a political assessment, not confirmation of an imminent military operation. Nevertheless, it illustrates how geopolitical uncertainty continues to influence the region.

Any renewed escalation could quickly reverse the recent improvement in shipping conditions.

2. Indonesia's October crude benchmark

The October ICP figure is expected in mid-November. Given the recent decline in international oil prices, it may provide a clearer indication of how much external pressure has eased.

However, a lower benchmark does not automatically translate into lower government spending or cheaper fuel. Existing compensation obligations and other costs still need to be considered.

3. The Indonesian rupiah

The exchange rate is another important variable.

On November 5, the rupiah traded at approximately Rp18,140 per US dollar based on Bank Indonesia's middle rate.

Because international oil transactions are generally denominated in US dollars, a weaker rupiah makes imported oil more expensive in local currency.

This means that even if global oil prices decline, currency depreciation can offset some of the relief.

4. What happens after 2026?

The government's current price guarantee only extends through the end of 2026.

There is still no clear indication of what fuel pricing policy will look like in 2027.

Whether the government continues absorbing the cost, gradually adjusts subsidised prices or introduces a different approach will have significant implications for household spending and public finances.

Indonesia's Fuel Policy Reflects a Much Bigger Global Dilemma

Indonesia's response to the Hormuz crisis illustrates a difficult choice faced by governments around the world.

When international energy prices rise, governments generally have two options. They can allow the increase to reach consumers through higher domestic prices, or they can absorb part of the shock through public spending and other financial mechanisms.

Indonesia has chosen the second approach for its most widely used subsidised fuels.

For now, this has helped protect household purchasing power and prevent a sudden increase in transportation costs. But the policy is not without consequences. Higher subsidies and compensation payments place additional pressure on public finances, while Pertamina must continue managing the gap between regulated prices and the actual cost of supplying fuel.

The reopening of the Strait of Hormuz provides some relief, but it does not erase the financial obligations created during months of disruption.

And that is perhaps the most important part of this story.

A stable fuel price at the pump does not mean the economy has escaped an energy shock. It means the cost has been absorbed somewhere else.

For Indonesia, the question is no longer simply whether fuel prices will rise. It is how long the government and Pertamina can continue carrying the difference, and what that decision will mean for the country's finances in the years ahead.

A calmer Strait of Hormuz may buy Indonesia some time. It does not guarantee that the bill will be smaller.

Sources and Further Reading

1. Industry.co.id, Harga BBM Hari Ini 6 November 2026. Fuel prices, Brent and WTI prices, ICP, exchange rates and regional comparisons.

2. ANTARA, Bahlil on Pertalite Not Rising. Indonesia's oil import volume and the government's budget oil price assumption.

3. Kompas.id, Harga BBM Oktan Tinggi Naik, Harga Pertamax dan Pertalite Tetap. ICP movements and commentary from Wahyu Tribowo Laksono.

4. Kontan, Perang AS-Iran Bikin Harga BBM Pertamina Berubah 3 Kali. Pertamina's fuel price adjustment timeline.

5. Tangselpos, Subsidi BBM Tembus Rp118,7 Triliun. Energy subsidy and compensation figures.

6. Unikma.ac.id, Harga BBM Non-Subsidi Naik Drastis. Commentary from energy economist Fahmy Radhi.

7. CNBC Indonesia, Ekspor Minyak via Selat Hormuz Kembali Normal, tapi BBM Masih Tertekan. October 1, 2026.

8. Wikipedia, 2026 Strait of Hormuz Crisis. Conflict timeline and early shipping estimates.

9. Rikopedia Research, Blokade Hormuz Gagal. October 21, 2026. Analysis of regional oil exports and pipeline alternatives.

10. SINDOnews, International News. November 6, 2026.

11. Maybank Trade, Harga BBM April 2026 Diprediksi Naik. Commentary containing the estimated fiscal impact of rising oil prices.