Middle East Conflict Threatens Indonesia's Energy Sovereignty: Import Dependence and Renewables Transition

The conflict between the United States and Israel with Iran has led to the blockade of the Strait of Hormuz, a major route for oil tankers, disrupting global oil supplies, including for Indonesia. This situation has caused crude oil prices in the international market to surge by up to 45%, with potential to reach US$120 per barrel during the conflict. This impacts Indonesia's fuel supply to this day. Domestic oil production stands at only 600,000 barrels per day, while national demand reaches 1.5-1.6 million barrels per day. This means Indonesia must import 1 million barrels per day to meet the gap between demand and production. Bhima Yudhistira, Executive Director of Celios, stated that importing oil amidst the US-Israel-Iran conflict burdens the State Revenue and Expenditure Budget (APBN). According to him, if global oil prices reach USD90-100 per barrel, subsidies will swell to Rp120-130 trillion. This also impacts LPG, as Indonesia still relies on imports from the global market. Indonesia imports around 6-7 million tons of LPG annually, with 20% originating from the Middle East. Bhima warned that an energy crisis can impact the national economy through rising inflation and trigger a chain of economic pressures. Amidst this situation, he urged the government to accelerate the transition to equitable renewable energy to reduce dependence on imported oil, hoping that Danantara will also finance clean energy projects. Novita Indri, an energy campaigner at Trend Asia, suggested that Pakistan's experience with its energy crisis in 2022-2023 could serve as an example for Indonesia. Pakistan reduced its dependence on natural gas by increasing the utilization of solar energy as its primary source. "There is no other way; reducing dependence on fossil fuels and massively promoting community-based renewable energy is the key to Indonesia's energy sovereignty," she emphasized. Source: Mongabay Indonesia