Indonesia raised it’s fuel prices almost 87 percent yesterday in efforts to revive it’s economy as oil subsidies took up more than 25% of Indonesia’s yearly budget.

Naturally such a ridiculously high hike in such a short time caused riots and demonstrators burned tires and blocked roads, causing havoc across the archipelago. Before the announcement, their rakyat already knew a hike was coming but rumours were going around that it was going to be less than 50%.

Price of premium gasoline is now Rp 4,500 (RM1.65) per litre, from Rp 2,400 (RM0.88). Diesel fuel is now Rp 4,300 (RM1.58) from Rp 2,100 (RM0.77) and kerosene, mostly used for cooking in low-income households, nearly tripling to Rp 2,000 (RM0.73), from Rp 700 (RM0.26).

This definitely hurts the rakyat of Indonesia. Half of it’s 220 million population lives on less than USD$2 a day.

Indonesia is Southeast Asia‘s only OPEC (Organization of the Petroleum Exporting Countries) member. But it has to import oil because of decades of declining investment in exploration and extraction due to corruption and a weak legal system that makes people wary of doing business here.

The oil prices are really hurting everyone and we should be thankful our government did not raise prices so suddenly, instead letting us get used to it by raising it in small increments.

Source: Associated Press via Yahoo