The Impact of Certain Price of Natural Gas Policy on Indonesia’s Economy

Indah Prasetyawati(1), Djoni Hartono(2*)

(1) Department of Economics, Faculty of Economics and Business, Universitas Indonesia
(2) Research Cluster on Energy Modeling and Regional Economic Analysis, Department of Economics, Faculty of Economics and Business, Universitas Indonesia
(*) Corresponding Author

Abstract

The Indonesian national industry has experienced a slowdown in growth and decrease in competitiveness, allegedly caused by the high price of natural gas. Therefore, the government intervened by implementing Certain Price of Natural Gas Policy (Harga Gas Bumi Tertentu), a policy that facilitates industries to obtain gas at lower prices through the issuance of Presidential Decree Number 121 of 2020 concerning Natural Gas Pricing. This study aims to analyze the impact of the policy on the national economy by considering the decline in state revenues as a consequence of the reduced price of natural gas for industry. Using the Computable General Equilibrium (CGE) model, analyses were carried out on various economic indicators. This study finds a decline in GDP for 0.076% in the short-run and an increase in GDP for 0.004% in the long-run. Furthermore, household income, in both rural and urban areas, decreases from 0.1 to 0.2% in both short and long-run. For industries that use gas intensively, the price reduction increases sectoral output and labor, and reduces commodity prices.

Keywords

Natural Gas Prices, Policy, Impact Analysis, CGE

Full Text:

PDF

References

Aissa, N., & Hartono, D. (2016). the Impact of Geothermal Energy Sector Development on Electricity Sector in Indonesia Economy. Buletin Ekonomi Moneter Dan Perbankan, 19(2), 153–176. https://doi.org/10.21098/bemp.v19i2.628

Ambya, Gunarto, T., Hendrawaty, E., Kesumah, F. S. D., & Wisnu, F. K. (2020). Future natural gas price forecasting model and its policy implication. International Journal of Energy Economics and Policy, 10(5), 58–63. https://doi.org/10.32479/ijeep.9676

Analisis Perkembangan Industri Edisi I - 2019. (n.d.). Kementerian Perindustrian.

Anas, M. (2019). Reforming Spending Policy and Its Impact on Indonesia’s Economy: The Case of Fuel Subsidy and Infrastructure. Jurnal Ekonomi Pembangunan: Kajian Masalah Ekonomi Dan Pembangunan, 20(1), 12–27. https://doi.org/10.23917/jep.v20i1.7733

Arrow, K. J. (2005). General Equilibrium.

Badan Pusat Statistik RI. (2020). Sistem Neraca Sosial Ekonomi. https://www.bps.go.id/subject/9/industri-besar-dan-sedang.html

Fattouh, B., & El-Katiri, L. (2012). Energy and Arab Economic Development. Energy and Arab Economic Development, p.9(United Nations Development Programme, Regional Bureau for Arab States). http://eprints.soas.ac.uk/14746/

Goncharuk, A. G. (2015). Industrial development under the pressure of high natural gas prices: A case of Ukraine. Rynek Energii, 118(3), 126–130.

Hartono, D., Purwanto, W. W., Nurkholis, & Rum, I. A. (2017). Impact analysis of natural gas policy in Indonesia. Energy Sources, Part B: Economics, Planning and Policy, 12(8), 699–706. https://doi.org/10.1080/15567249.2017.1289280

Hartono, D. (2002). Analisis Dampak Kebijakan Harga Energi terhadap Perekonomian dan Distribusi Pendapatan di DKI Jakarta: Aplikasi Model Keseimbangan Umum (CGE). Tesis Universitas Indonesia, 1(69), 5–24.

Hartono, D, Hastuti, S. H., Halimatussadiah, A., Saraswati, A., Mita, A. F., & Indriani, V. (2020). Comparing the impacts of fossil and renewable energy investments in Indonesia: A simple general equilibrium analysis. Heliyon, 6(6), e04120. https://doi.org/10.1016/j.heliyon.2020.e04120

Hartono, D, & Resosudarmo, B. P. (2008). The economy-wide impact of controlling energy consumption in Indonesia: An analysis using a Social Accounting Matrix framework. Energy Policy, 36(4), 1404–1419. https://doi.org/10.1016/j.enpol.2007.12.011

He, Y., & Lin, B. (2017). The impact of natural gas price control in China: A computable general equilibrium approach. Energy Policy, 107(June 2013), 524–531. https://doi.org/10.1016/j.enpol.2017.05.015

Hutagalung, A. M., Hartono, D., Arentsen, M. J., & Lovett, J. C. (2020). The economic implications of natural gas pricing adjustment in Indonesia. International Energy Journal, 20(2), 129–140.

Hutagalung, A. M., Hartono, D., Arentsen, M., & Lovett, J. (2017). The economic implications of natural gas infrastructure investment. Energy Sources, Part B: Economics, Planning and Policy, 12(12), 1080–1087. https://doi.org/10.1080/15567249.2017.1366600

Kementerian Perindustrian. (2020). Menperin: Penurunan Harga Gas Berdampak Pada Kenaikan Penerimaan Negara. https://kemenperin.go.id/artikel/21348/Menperin:-Penurunan-Harga-Gas-Berdampak-Pada-Kenaikan-Penerimaan-Negara

Lin, B., & Li, Z. (2021). Does natural gas pricing reform establish an effective mechanism in China: A policy evaluation perspective. Applied Energy, 282(PA), 116205. https://doi.org/10.1016/j.apenergy.2020.116205

Nugroho, A., & Amir, H. (2018). Analisis Dampak Insentif Fiskal Penetapan Harga Gas Bagi Industri Domestik Terhadap Perekonomian: Pendekatan Model CGE Dinamis. Kajian Ekonomi Dan Keuangan, 2(1), 39–51. https://doi.org/10.31685/kek.v2i1.322

Orlov, A. (2015). An assessment of optimal gas pricing in Russia: A CGE approach. Energy Economics, 49(2015), 492–506. https://doi.org/10.1016/j.eneco.2015.03.013

Orlov, A. (2017). Distributional effects of higher natural gas prices in Russia. Energy Policy, 109(September 2016), 590–600. https://doi.org/10.1016/j.enpol.2017.07.047

Resosudarmo, B. P., Yusuf, A. A., Hartono, D., & Nurdianto, D. A. (2011). Regional Economic Modelling For Indonesia Implementation of IRSA - INDONESIA 5.

Schumpeter, J. A., & Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. Journal of the American Statistical Association, 31(196), 791. https://doi.org/10.2307/2278703

Sobri, A. R., Hartono, D., & Lestari, N. I. (2020). Energy efficiency, rebound effect and environmental tax reform in Indonesia. International Journal of Energy Technology and Policy, 16(2), 136–159. https://doi.org/10.1504/IJETP.2020.105506

Wang, T., & Lin, B. (2014). China’s natural gas consumption and subsidies-From a sector perspective. Energy Policy, 65, 541–551. https://doi.org/10.1016/j.enpol.2013.10.065

World Bank. (2017). World Bank national accounts data. https://data.worldbank.org/indicator/NV.IND.MANF.ZS

Zhang, W., Yang, J., Zhang, Z., & Shackman, J. D. (2017). Natural gas price effects in China based on the CGE model. Journal of Cleaner Production, 147, 497–505. https://doi.org/10.1016/j.jclepro.2017.01.109

DOI: 10.23917/jep.v24i1.21544

Article Metrics

Abstract view(s): 385 time(s)
PDF: 1023 time(s)

Refbacks