Opinion: Between the barrel and the ballot: Indonesia’s oil and gas fiscal strain as a political communication crisis

By Ressa Uli Patrissia

(Doctoral Communication Science Sahid University, Lecturer at Muhammadiyah Palangka Raya University, Business Support Manager at Provisio Consulting)

When oil prices breach the assumptions embedded in a national budget, the immediate conversation turns to subsidies, import bills, and fiscal deficits. In Indonesia, where the 2026 state budget was built around a crude price assumption of US$70 per barrel, the ongoing Middle East conflict and the disruption of the Strait of Hormuz have turned that assumption into a relic almost overnight. With Brent crude surging past US$100 per barrel and the rupiah weakening to almost Rp 17,000 per dollar, the Prabowo administration faces not merely an economic problem but a political communication crisis of the first order.

The arithmetic is unforgiving. According to Bank Mandiri’s estimates, every one-dollar increase in crude oil prices adds approximately Rp 10.3 trillion in energy subsidy and compensation costs, while generating only around Rp 3.5 trillion in additional tax and royalty revenues. That gap nearly three-to-one on the wrong side, means that every sustained week of elevated prices erodes the government’s fiscal position further. The Finance Ministry has warned that the budget deficit could widen to 3.6 percent of GDP if crude averages US$92 per barrel this year, breaching the statutory 3 percent cap that has anchored Indonesia’s fiscal credibility since the post-Asian crisis reforms of the early 2000s. Compounding this is the structural vulnerability of Indonesia’s fuel supply chain. Domestic reserves cover only 20 to 25 days of consumption—far below the 90-day threshold recommended by the International Energy Agency. About a quarter of the country’s oil imports transit through the Strait of Hormuz, a chokepoint now effectively disrupted. The government’s pivot toward sourcing crude from the United States, formalized in the February 2026 Agreement on Reciprocal Trade, offers a partial short-term hedge but introduces a different kind of dependency; a US$15 billion annual import commitment that critics argue locks Indonesia into prolonged fossil fuel reliance at the expense of energy sovereignty.

The missing strategic narrative

What makes the current moment politically treacherous is the gap between the Prabowo administration’s stated energy narrative and the policy actions that follow. President Prabowo came to office championing “energy self-sufficiency” with considerable rhetorical conviction. At the G20 Summit in late 2024, he pledged to phase out all fossil fuel power plants within 15 years and build 75 gigawatts of renewable capacity. These were bold, headline-generating commitments. But just over a year later, the administration signed a trade agreement that effectively mandates large-scale US fossil fuel imports, while simultaneously directing an increase in domestic coal production to capitalize on elevated global prices. In political communication terms, this is a credibility problem. When the government tells its citizens that energy independence is a national priority while simultaneously binding the country to a multi-billion-dollar fossil fuel import obligation, the dissonance is not subtle. The public, and the markets, register these contradictions. Fitch Ratings and Moody’s both downgraded Indonesia’s credit outlook to negative in recent months, citing erosion of policy certainty, a characterization the government has disputed but has not yet countered with coherent policy signalling.

The decision not to raise subsidized fuel prices ahead of the Eid al-Fitr holiday is politically understandable. More than 100 million Indonesians travel during the annual mudik migration, and fuel prices are widely regarded as an economic entitlement. But the communication around the decision has been reactive rather than strategic. Coordinating Economic Minister Airlangga Hartarto’s public comment that the government would simply “wait and see” may have been intended to project calm, but in the context of a deepening fiscal squeeze, it reads as a signal of paralysis rather than preparation. Effective political communication during an energy crisis requires more than reassurance that prices will not go up tomorrow. It requires a strategic narrative: an honest acknowledgment of the constraints the country faces, a credible explanation of trade-offs, and a forward-looking vision that connects short-term hardship to long-term resilience. On all three fronts, the current communication approach falls short.

Consider the trade-offs. Indonesia’s oil fields are overwhelmingly mature, with production declining naturally at 16 to 20 percent per year without major new discoveries. Upstream investment in 2025 reached only US$11.2 billion against a target of US$16.1 billion, with exploration spending—the only fundamental path to reducing import dependence, accounting for a mere US$500 million. The Balikpapan refinery expansion, inaugurated in January 2026, is a genuine achievement that adds 100,000 barrels per day of processing capacity. But these supply-side gains are insufficient to close the gap between what Indonesia produces and what it consumes. What is absent from public discourse is a frank government narrative that connects these dots: that Indonesia is structurally a net oil importer, that this makes the economy sensitive to price shocks beyond its control, and that the path to reducing that vulnerability runs through both accelerated exploration at home and a serious commitment to diversifying the energy mix. Instead, the communication oscillates between optimistic projections about upstream production, defensive assurances about fuel prices, and ad hoc crisis management: a pattern that, over time, erodes trust.

Constructive political dialogue needed

The Prabowo administration has the ingredients for a more effective political communication strategy, if it chooses to use them. First, it can lead with transparency. Publishing scenario analyses, if oil averages US$80, US$90, or US$100 per barrel through 2026, and the corresponding fiscal implications would demonstrate competence rather than weakness. The Indonesian public has lived through fuel price adjustments before; what corrodes confidence is the perception that the government is unprepared or evasive. Second, the administration can reframe the US trade agreement. Rather than allowing critics to define the deal as a capitulation, the government should articulate it as a deliberate supply diversification strategy in the context of Middle Eastern instability while committing to concrete timelines and investment targets for domestic renewable energy that would reduce fossil fuel dependence over the medium term. Framing is not spin; it is the disciplined alignment of policy actions with a coherent story. Third, Prabowo himself should use his considerable political capital to speak directly about fiscal discipline. His remark in a recent Bloomberg interview—that he does not “believe in deficits” and that Indonesia must “live within our means” was the right instinct. But that message must be reinforced consistently and translated into visible policy choices, not just uttered once and allowed to recede behind the noise of day-to-day crisis management.

The Stakes for the oil and gas sector

For industry stakeholders reading this in Petromindo.com, the fiscal strain and communication deficit have direct implications. Regulatory uncertainty tends to increase when governments are under fiscal pressure, tax regimes shift, incentive structures are revised, and approval timelines stretch. The upstream sector, which needs long-term policy stability above almost anything else, is particularly exposed. Indonesia’s eight new oil and gas projects slated for 2026, targeting an additional 8,200 barrels of oil per day and 214 MMSCFD of gas, are a positive step. But their contribution will be marginal unless embedded in a broader policy environment that encourages sustained investment. The SKK Migas agenda for 2026 including the activation of idle fields and the application of multi-stage fracturing technology reflects sound operational thinking. What it lacks is a political communication framework that explains to the Indonesian public why these upstream investments matter, how they connect to energy security, and why policy consistency is essential to attracting the capital required. In the absence of that framework, the oil and gas sector risks being caught between populist pressure to keep fuel prices low and fiscal pressure to extract more revenue from producers.

Hope for the better

Indonesia’s oil and gas fiscal strain is real, but it is not unprecedented. The country has navigated commodity price shocks before. What distinguishes this moment is the convergence of external disruption, structural import dependence, and a political communication approach that has not yet risen to the scale of the challenge. President Prabowo has the mandate, the political capital, and the economic tools to mount a credible response. What is still missing is the narrative; a consistent, honest, forward-looking story that connects the hardship of today to the resilience of tomorrow. For a leader who built his political career on strength and decisiveness, this is an opportunity to demonstrate that those qualities extend to the most difficult conversation a government can have with its people: telling them the truth about the economy they live in, and the choices that lie ahead.

The views expressed in this article are the author’s own and do not necessarily reflect the editorial position of Petromindo.