An Input to the Indonesia Fuel Price System Reforms: A review of international experiences with fuel pricing systems

This study looked at the fuel pricing arrangements of different countries around the world in order to provide Indonesia with information that may help inform the development of its own domestic pricing policy.

The aim is to strengthen and enforce the new pricing mechanism introduced in 2015 at the same time as identifying measures to safeguard consumers from the impacts of fuel price volatility and potential high future fuel prices. The study’s objectives are as follows:

• To set out the baseline for understanding Indonesia’s current pricing system, previous experiences with non-ad hoc pricing and possible legal constraints around market energy pricing.
• To summarize existing knowledge about international pricing systems in a format that is targeted at the current needs of Indonesian policy-makers.
• To identify policy options for Indonesia to consider based on international experience.

Three main research activities took place to prepare this paper: first, a review of key data and legislation on fuel pricing in Indonesia, including experiences with an automatic pricing mechanism in 2002 and constitutional constraints on fuel pricing; second, a review of international literature synthesizing experiences with fuel pricing and publically available information on case study countries; and third, a series of interviews with international experts and national fuel price regulators conducted under the Chatham House rule, to ensure that key principles, trends and political realities of fuel pricing arrangements were adequately addressed.