Ditya A. Nurdianto

Energy Security in Indonesia

The issue of energy security has been a subject of discussions in Indonesia for a long time. However, until the end of the 1990s, it had never been at the centre of the countrys policy debates. The sharp depreciation of Rupiah during the 1997/98 Asian financial crisis and increase in the price of crude oil in the early 2000s made it very expensive to control domestic prices of fuel and electricity through subsidies. With approximately 43 percent of the countrys energy sources derived from crude oil, the amount of government spending on energy subsidies increased from almost nothing in 1996 to approximately 21 percent of total government expenditure in 2005. Whether the government could guarantee Indonesias energy needs at an affordable price, and how to achieve it, has therefore become one of the hottest policy issues. This paper probes reasoning behind the current energy security policies and discusses some of the main policy challenges, paying special attention to the emerging interest on climate change issues.