The story. With oil prices topping $100 a barrel amid the U.S.-Israel war on Iran, Indonesia's dependence on imported fossil fuels is hitting the national budget hard. The country imports more than half its oil, and the Jakarta-based think tank INDEF estimates every $1 increase in oil prices widens the fiscal deficit by about $400 million — putting the total additional burden at up to $3 billion.

The bigger picture. The oil shock is painful, but it's a symptom of a deeper structural problem. Fossil fuels dominate Indonesia's entire energy system, not just transport. Coal alone generates 61% of the country's electricity (Ember, 2024), pushing carbon intensity — how much CO2 it takes to produce a unit of electricity — to 680 grams per kilowatt-hour, 44% above the global average (Ember). Solar and wind together account for less than 1% of generation (Ember). The government's response so far leans into that dependence: ramping up domestic coal output and expanding biofuels. But the biofuel path carries its own risks. Indonesia lost 1.3 million hectares of tree cover in 2024 (GFW), and 57% of the country's cumulative deforestation is commodity-driven — forest cleared permanently for commercial crops like palm oil, a primary biofuel feedstock.

The tension. Indonesia's immediate instinct — more coal, more biofuel — addresses short-term supply but deepens the structural exposure that made this crisis so costly. Each megawatt-hour locked into fossil generation is another unit of electricity whose cost remains hostage to the next global price shock.