COMMENT: Oil at or above $100 per barrel threatens Indonesia’s Eid spending

Indonesia is heading towards the end of Ramadan, and Eid this year, under a massive cloud of economic stress. The real trouble started in the global energy markets, where crude oil recently blew past $100 per barrel. 

Local analysts are specifically watching the Strait of Hormuz as much of the worry felt by regular Indonesians is being driven by tensions between the US and Iran. Afaqa Hudaya, an economist from the Institute For Development of Economics and Finance (INDEF), pointed out to Tirto.ID that for an oil-importing country like Indonesia, problems in the Strait mean a spike in costs throughout the archipelago almost instantly.

The timing of this latest price surge, however, is a nightmare for the government. When the 2026 state budget was first drawn up, the oil price assumptions were much more optimistic than the reality we’re seeing now. Data from the Indonesia Business Post suggests that the gap between those older forecasts and today’s market could alone blow out the national subsidy bill by trillions of rupiah, and if the administration tries to keep domestic fuel prices stable to protect the public, they're going to drain the country’s fiscal reserves at an alarming rate.

With the rupiah under pressure and the treasury stretched thin, experts like Abdul Manap Pulungan think the "business as usual" approach is over. He told Tirto.ID that the government is hitting a breaking point where they have to choose: keep their bigger social promises or staying fiscally stable. As a result, we may soon see a painful budget reshuffle, which could mean high-profile projects, like the Free Nutritious Meals (MBG) initiative end up on the chopping block just to cover the rising cost of energy.

Eid travel season magnifies fuel demand

Indonesia’s 2026 state budget was drafted with an optimistic oil price assumption of $70 per barrel. With current market reality hovering well above that level though, the gap threatens to inflate the national subsidy bill by hundreds of trillions of rupiah, according to Voice of Indonesia.

At the heart of this period is the mudik tradition in Islam - a time when millions of people across the archipelago travel back to their hometown to reunite with family. This is not just a cultural milestone, but it represents an incredible surge in economic activity that places a massive strain on the nation’s transportation and fuel infrastructure.

From local bus terminals to regional ferry ports and major airports, operators are already ramping up capacity for the holiday rush. It is not just about passenger travel either, as the weeks leading up to Eid see a heavy intensification of logistics as businesses move food and consumer goods to every corner of the country. Naturally, this causes fuel consumption to skyrocket exactly when global markets are at their most volatile.

Voice of Indonesia also reports that finance minister Purbaya Yudhi Sadewa recently noted that the government is monitoring the situation, but the pressure is immense. The budget deficit is nearing the legal cap of 3% of GDP, and the rupiah has plummeted toward a record low of 17,000 to the dollar. At worst, high-profile projects, such as the Free Nutritious Meals (MBG) initiative, could face "efficiency cuts" or reshuffling just to keep the lights on.

Middle-class households feel the squeeze

From a personal perspective as an Indonesian writer for Bno, the Asian arm of Bne IntelliNews, being middle class in Indonesia right now feels like a constant squeeze. To understand why this hits the middle class so hard, one must look at Indonesia’s unique, two-tiered fuel system. The government heavily subsidises Pertalite (a lower-octane, RON 90 fuel) to keep it affordable for the masses, currently fixed at IDR10,000 ($0.59) per litre.

Our subsidy system is a bit of a mixed bag; it’s great if you’re using Pertalite, but it leaves a lot of us out in the cold. Many families use Pertamax because their cars actually need the higher octane petrol. But since there’s no subsidy for Pertamax, we’re at the mercy of the global oil market. Every time international prices tick up, our bank accounts take a hit almost immediately.

And the timing couldn't be worse with the end of Ramadan around the corner. We’re already seeing that typical "pre-fasting" price hike at the markets. It happens every year when everyone starts stocking up for Iftar and Eid, as demand goes through the roof, and suddenly basic groceries cost a small fortune. Businesses ramp up production, but it’s never quite enough to keep prices stable.

The government always tries to step in and tell traders not to hike prices, but it rarely works.

Once we factor in high demand and the cost of shipping goods across the islands, prices go up regardless of what the official warnings say. As such, for anyone planning their mudik homecoming trip this year, the global oil crisis isn't just a news headline anymore. We feel it at the pump, we see it in the price of eggs at the market, and we notice it most painfully when calculating the cost of finally getting home to see family.