An oil crisis is the best argument for going electric
How a transition to electric two-wheelers can help Indonesia brace under an unpredictable international order
The author is a transport professional, focusing on Indonesia’s transport and energy policy. He holds a Master’s degree in Transport Planning and Engineering from Newcastle University. This article reflects the author’s own analysis and views and does not necessarily represent those of his employer or The Reformist.
Making amends with tense geopolitical realities
Pertalite fuel is still Rp 10,000 per liter today. The price will stay like this at least until Eid comes. At the pump, nothing appears to have changed. What has changed is everything behind it.
Since the Iran conflict escalated, oil prices have become deeply volatile. Brent oil surged past US$100 a barrel for the first time since Russia’s 2022 invasion of Ukraine, briefly touching US$119 before pulling back as markets processed mixed signals from Washington about the conflict’s duration.
As a result, the state budget absorbs a net Rp 6.7 trillion for every dollar oil climbs above the government’s own benchmark. Every dollar rise in the Indonesian Crude Price adds Rp 10.3 trillion in subsidy expenditure while generating only Rp 3.6 trillion in additional revenue. The net loss is Rp 6.7 trillion per dollar, based on the figures from the Coordinating Ministry for Economic Affairs.
Indonesia has budgeted Rp 210.1 trillion for energy subsidies in 2026, up from Rp 203.41 trillion the previous year. That allocation represents more than a quarter of the entire national education budget, an inversion of priorities worth sitting with.
At the same time, Indonesia still consumes 1.6 million barrels of oil per day, while producing less than half of the consumption. The consumption gap is now filled with imports. Of all petroleum imports, gasoline alone accounts for 45 percent, which is heavily subsidized.
The subsidy structure compounds the problem further. Designed to protect low-income families, such as the online ride-hailing driver or the factory worker commuting by motorcycle, the subsidy instead disproportionately benefits upper-income households who own cars and consume more fuel in absolute volume. Redirecting even a fraction of that allocation toward incentives for lower-income households would reach the commuters the subsidy was originally designed to protect.
Indonesia became a net oil importer in 2004 and formally left the Organization of the Petroleum Exporting Countries (OPEC) in 2008. For decades, every major oil shock has produced similar measures: subsidies, absorption, and monitoring. From the 2008 shock to the Ukraine conflict in 2022, the response was always the same: hold the price and absorb the cost.
Today’s geopolitical escalation, however, is different in degree. Oil prices surged 35 percent in a single week, the largest weekly gain for U.S. crude futures in the history of the contract dating back to 1983. Indonesia’s 2026 state budget assumed oil at US$70 per barrel. It is already trading above that, with no solution to the conflict in sight.
Furthermore, the fiscal burden has not come in one dimension. A waning rupiah means more pressure on the state budget. These two vulnerabilities reinforce each other, and neither resolves without structural intervention from the government.
An electric solution to the structural gap
There is a structural exit from this exposure. Indonesia has already partially built it: transport electrification.
In Indonesia, the transport sector accounts for 36% of energy demand. A huge part of it is consumed by two-wheelers, which comprise more than 130 million registered vehicles as of now. Almost every household now owns at least one motorcycle.
Each gasoline motorcycle, averaging 30 to 40 kilometers of daily commuting, consumes roughly one liter of gasoline per day. A significant part of it is imported, globally priced, and exposed to whatever happens next in the Strait of Hormuz.
Given that dependency, electric two-wheelers offer a structural alternative. At current tariffs and oil prices, electric motorcycles carry up to 72percent lower total cost of ownership (TCO) over five years compared to gasoline motorcycles.
For lower-income households running on tight margins, that operational saving is not abstract. It is money that stays in the household rather than going to the fuel pump and straining the state budget with costly fuel subsidies. Electricity is domestically priced and, while not yet fully renewable, is structurally insulated from geopolitical disruption.
The Asian Development Bank (ADB) estimates that aggressive two-wheeler electrification, backed by consistent policy and urban mobility measures, could save Indonesia US$3.4 billion annually from reduced fuel imports and emissions costs. With the state budget under mounting pressure, those savings are a fiscal necessity.
Presidential Regulation No.55/2019 targets 13 million electric motorcycles by 2030, a framework the government actively reinforced as recently as 2023 through Presidential Regulation No.79/2023, adding new incentive mechanisms and updated provisions.
A valiant push forward for a more resilient future
The destination was never abandoned. The policy mechanism was temporarily removed. What is required now is policy consistency from all levels.
The electric passenger car market can be the ideal example. With coordinated policy on incentives, the battery electric car market share surpassed 5 percent in 2024 and reached 13 percent by 2025. A key driver was a consistent incentive policy that brought more models to market and increased price competition.
Electric two-wheelers can follow the same path even at a far greater scale with policy certainty. At a lower price point and a larger market base, the two-wheeler transition has stronger structural conditions than the car transition that already succeeded.
On the other hand, the upfront purchase price remains the clearest barrier. Sticker price parity, the stage at which an electric vehicle is equal in price to its non-electric counterpart, is not expected until around 2030, which remains a real constraint for lower-income households making immediate purchasing decisions.
Nevertheless, the total cost of ownership for electric two-wheelers is now competitive, especially when the oil price fluctuates. By switching to an electric motorcycle, a commuter riding 30–40 km daily saves meaningfully on fuel and maintenance, with those savings compounding over the first five years of ownership.
Deploying even a portion of the subsidy budget as electric vehicle purchase incentives would make the transition more equitable and more durable, targeting the commuters the current subsidy was meant to serve. The question is whether Indonesia wants to spend that money absorbing the current shock or building insulation against the next one.
After all, the incentives program for electric two-wheelers is not new for the Indonesian government. The government introduced an electric motorcycle incentive program, then terminated it abruptly in 2024, just as the market was responding.
Electric motorcycle sales peaked at 1.4 percent of total sales in Q2 2024, then fell to 0.6 percent by the end of the year. The lesson is not that the subsidy failed the market. It worked well, but the program withdrawal ended the sales growth prematurely. The car market succeeded for precisely the same reason the motorcycle market contracted: policy consistency, not product readiness, determines the outcome.
That misstep must not be repeated. Reinstating and sustaining commitment to enabling policies is essential, especially during oil price spikes. Electrification is not an immediate answer to this crisis. It is the structural answer to the next one if Indonesia commits now.
Nothing has changed at the pump. The price of oil still reads Rp 10,000 per liter. But behind that stillness, the state budget is silently absorbing Rp 6.7 trillion for every dollar oil climbs. The oil price is climbing faster than the budget can accommodate.
The structural answer is already within reach. The next war is not a matter of if. The only question is whether Indonesia is still paying for it at the pump.
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