Energy Infrastructure Under Attack: Indonesia Faces Up to Rp994 Trillion in Losses Amid Global Oil Price Surge and Geopolitical Tensions

Indonesia’s energy infrastructure has suffered significant damage from the ongoing Iran-Israel conflict, with Gulf states incurring losses up to 994 trillion rupiah, according to CNN Indonesia reporting on April 21, 2026.

The bombardment of energy facilities has disrupted global oil supplies, contributing to rising prices that are straining Indonesia’s fiscal position as a net oil importer since 2003. The country’s economy remains heavily dependent on fossil fuels for transport, industry, and electricity, amplifying its vulnerability to market volatility.

Global oil prices have surged above $100 a barrel due to disruptions in the Strait of Hormuz, a critical chokepoint for global oil flows, following the U.S.-Israel war on Iran that began in late February 2026. This represents a sharp increase from approximately $70 a barrel prior to the conflict.

The price surge has exposed Indonesia’s limited energy reserves, with oil storage capacity covering only about 25 days of supply—well below standard strategic reserve levels—raising concerns over energy security and fiscal stability.

In response to the 2025 oil and gas revenue shortfall, where actual non-tax state revenue reached only 83.7 percent of the Rp125.46 trillion target (amounting to Rp105.4 trillion), the Indonesian government is preparing to absorb the shock of rising oil prices using state budget allocations and increased funding for fuel subsidies.

The 2025 shortfall followed average crude oil prices of around $68 per barrel, significantly below the budget assumption of $82 per barrel. Revenue from the oil and gas sector also declined from Rp110.9 trillion in 2024 to Rp105.4 trillion in 2025.

Investments in the energy and mineral resources sector decreased by 1.9 percent in 2025, falling to US$31.7 billion from US$32.3 billion in 2024, with oil and gas investments accounting for US$18 billion of the total.

Despite calls to accelerate renewable energy development to reduce exposure to volatile global markets, the government is simultaneously boosting coal output and exploring expanded biofuel use—measures critics warn could undermine climate goals and create new environmental risks.

Civil society groups are advocating for windfall taxes on fossil fuel companies to fund a just energy transition, arguing that current policies risk deepening inequality and prolonging dependence on extractive industries.

The energy and mineral resources sector continues to employ over 871,574 workers in 2025, underscoring its role in workforce absorption amid ongoing fiscal and economic pressures.