The days of Premium, the 88-octane gasoline marketed by state oil and gas firm Pertamina, are numbered. By 2017, Indonesia will no longer have this low-grade fuel, and for that, we say, “About time.”

The Premium program, devised decades ago when Indonesia was still a net oil exporter and member of OPEC, was aimed at subsidizing fuel and transportation costs for low-income Indonesians. The truth, though, is that for years the artificially low price has benefited mostly those in the middle- and high-income brackets who can afford a motor vehicle.

The administration of President Joko Widodo took a bold stand last November by raising the price of Premium and putting the savings to other, more productive development programs. At the start of this year, it went one better and eradicated the subsidy for Premium entirely.

Pertamina’s move to now introduce a new, higher-grade fuel in May to eventually phase out Premium continues a policy that this newspaper has long championed. Premium is costly to blend, highly polluting to burn, and damaging to engines with prolonged use. Indonesians need, and deserve, a better-quality product from the country’s biggest supplier of gasoline.

The downside, of course, is that Pertamina’s refineries will have to be upgraded to be able to produce the new blend, 90-octane Pertalite. This will be costly, but if in the long run it translates into improved productivity through less downtime for private motor vehicles and fleets, and less air pollution for the rest of us, then the cost will be worth it.

The price at the pump will go up, and people will feel the pinch, so it is the Joko administration’s job to mitigate the resultant inflationary pressure. We have confidence that this can be done.

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Source: The Jakarta Globe