What Kadin Recommends to Handle Rising Oil Prices
B50 Program Seen as Strategic Shield Against Oil Price Volatility
Kabarsaji.com – Indonesia’s planned B50 biodiesel program is gaining greater strategic importance as global crude prices move toward and beyond the US$100-per-barrel range, with implications for imports, the state budget, domestic industry, and household purchasing power.
Fakhrul Fulvian, Director of Insight at the Kadin Indonesia Institute, said the higher cost of oil strengthens the case for expanding biofuel use. In his view, B50 should be treated as more than a fuel-blending policy or a way to replace imported diesel. It could also help build industrial capacity at home while easing pressure on Indonesia’s external accounts.
B50 refers to diesel fuel blended with 50 percent biodiesel. The policy would increase reliance on domestic feedstock while reducing the volume of diesel that must be purchased abroad. Government projections cited by Fakhrul estimate that B50 could replace about 18 million kiloliters of imported diesel, producing foreign-exchange savings of roughly Rp170 trillion.
Those savings could be significant at a time when expensive oil raises the cost of meeting Indonesia’s energy needs. Lower import spending may reduce exposure to swings in global commodity markets and lessen the need for overseas financing when the balance of payments is under strain.
“So far, when the balance of payments comes under pressure, discussions heavily center on how to draw dollars into Indonesia. B50 operates in the opposite direction, curbing dollar outflows while converting domestic resources into national energy capacity,” Fakhrul said in a written statement released on Friday, September 11, 2026.
Industrial Benefits Must Go Beyond Fuel Blending
The Kadin Indonesia Institute argues that the program’s longer-term value will depend on the industrial ecosystem that develops around it. Increased biodiesel demand could create opportunities across refining, storage, terminal operations, blending facilities, logistics, engineering services, fuel testing, and the manufacture of equipment within Indonesia.
For Fakhrul, simply substituting diesel imports with local feedstock would not be enough to demonstrate a successful transformation. The more meaningful test is whether the policy creates durable domestic expertise, technology, transport networks, and industrial capability.
“We must not only replace imported diesel with domestic feedstock. The benchmark of industrial transformation lies in how much new engineering, technology, logistics, and industrial capabilities are ultimately built within Indonesia,” he added.
To support that objective, the institute is promoting a B50 Industrial Transformation Roadmap. Such a plan would extend beyond setting a blending percentage. It would map the availability of feedstock, refining needs, distribution facilities, machinery preparedness, locally produced equipment, and development prospects for advanced fuels, including sustainable aviation fuel.
A roadmap could also help connect fuel policy with the practical needs of sectors that consume large volumes of diesel. Mining, plantations, trucking, shipping, and heavy-equipment operations would all be affected by changes in fuel composition. Their experience will be central to determining whether B50 delivers its expected economic advantages in real operating conditions.
Fakhrul said policymakers need to closely assess fuel efficiency, reliability of machinery, maintenance costs, periods of operational downtime, and the productivity of equipment after implementation. A reduction in imports could lose part of its economic appeal if businesses face significantly higher repair bills or interruptions to their operations.
“The foreign exchange savings are substantial, but we must ensure there are no hidden costs in the form of elevated maintenance, downtime, or reduced productivity. B50 must be evaluated based on its net economic benefit for Indonesia,” he said.
Oil Prices Add Pressure to the 2026 State Budget
The policy discussion is unfolding as rising global crude prices place additional strain on public finances. Energy and Mineral Resources Minister Bahlil Lahadalia addressed the issue after oil prices moved above US$108.68 per barrel, acknowledging that higher prices would increase the burden of fuel subsidies.
“This is certainly not a light matter. It is heavy, as subsidy expenditures will undoubtedly rise,” Bahlil told reporters at his office in Jakarta on Friday, September 11, 2026.
The 2026 State Budget used an Indonesian Crude Price benchmark of US$70 per barrel. From January through September, however, the average ICP has ranged from US$80 to US$90 per barrel as global oil costs rose above US$100.
The difference matters because fuel spending is highly sensitive to movements in crude prices. Calculations from the Coordinating Ministry for Economic Affairs show that every additional US$1 per barrel in the ICP raises oil expenditure by Rp10.3 trillion. Higher prices also generate more state revenue from the oil and gas sector, with a US$1 increase estimated to add around Rp3.6 trillion in non-tax state revenue, or PNBP.
Even so, the additional revenue does not fully offset the larger spending obligation created by higher oil prices. The result is greater pressure on the state budget, particularly when the government maintains support for subsidized fuel consumers.
Subsidized Fuel Prices to Remain Stable
Bahlil said the government will not increase subsidized fuel prices despite the more difficult fiscal environment. He said President Prabowo Subianto has directed the government to keep those prices stable to protect the purchasing power of lower- and middle-income households.
“President Prabowo believes that safeguarding the purchasing power of lower- and middle-income groups is far more important, even amid the measures we must undertake. Expanding the subsidy budget, I think, is part of the steps we take,” Bahlil said.
The combination of stable subsidized fuel prices and expensive global oil creates a sharper policy challenge. In the immediate term, the government must manage the impact on subsidy spending. Over a longer horizon, initiatives such as B50 are being presented as a way to reduce the country’s dependence on imported diesel and limit the amount of foreign currency leaving the economy.
Whether the program can meet those expectations will depend on more than its blending target. Supply reliability, infrastructure readiness, equipment performance, and the ability of Indonesian companies to capture new industrial activity will determine its broader economic contribution.
Related Reading
Frequently Asked Questions
What is What Kadin Recommends to Handle Rising?What Kadin Recommends to Handle Rising is the main topic of this guide. The article explains the context, practical details, and next steps readers should understand.
Why does What Kadin Recommends to Handle Rising matter?What Kadin Recommends to Handle Rising matters because readers are looking for a useful answer, not just a short summary. Good content should match search intent and help them decide what to do next.