Energy Price Stability in Times of Crisis: Policy Trade-offs and Crisis Management in Indonesia’s Fuel and LPG Subsidy Strategy

Abstract

The global energy crisis has forced many countries to adjust domestic energy prices in response to rising international costs. In contrast, Indonesia has adopted a distinct policy approach by maintaining stable prices of subsidized fuels and liquefied petroleum gas (LPG) through fiscal intervention, while gradually allowing market-based adjustments for non-subsidized fuels. This study analyzes Indonesia’s energy price stabilization strategy and examines the policy trade-offs associated with its implementation.

Using a qualitative policy analysis approach, this research draws on government reports, international publications, and recent empirical data. The findings show that Indonesia effectively mitigates the immediate impact of global price volatility by absorbing external shocks through subsidies and fiscal mechanisms. However, this stability comes at the cost of increased fiscal pressure, potential consumption distortions, and delayed energy transition. The widening price gap between subsidized and non-subsidized fuels risks encouraging consumption shifts toward subsidized products, thereby complicating fiscal risk management.

This study argues that Indonesia does not eliminate the energy crisis but redistributes its impact from consumers to the state. It contributes to the literature by reframing energy subsidies as a crisis management instrument, highlighting the trade-offs between social protection, fiscal sustainability, and long-term energy security.