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Declining Appeal of Diesel Demand in Indonesia
Indonesia's oil demand growth forecast is downgraded due to potential diesel losses from fuel substitution. Gasoline demand remains strong, but subsidy cuts in 2025 may impact future fuel demand growth.
Indonesia’s diesel demand has experienced a notable decline in recent years, as the country transitions towards more sustainable energy sources.
Key View
- We have revised down our forecast for Indonesia’s oil demand growth, considering the potential loss in diesel demand due to fuel substitution in the power and industrial sectors.
- Evolving energy transition policies are expected to create challenges for diesel and fuel oil demand across various economic sectors.
- Gasoline demand is projected to remain resilient supported by rising car ownership and lack of substitutes from biofuel industry.
- We anticipate the government’s plan to cut fuel subsidies in 2025 will have implications for fuel demand growth prospects, especially in the transport and industrial sectors.
Once heavily reliant on diesel for transportation and industrial purposes, Indonesia is now shifting its focus to cleaner alternatives, partly driven by government initiatives aimed at reducing carbon emissions. This change reflects a growing global awareness of environmental issues and the urgent need to combat climate change.
The rise in electric vehicles (EVs) and the promotion of biodiesel have played significant roles in diminishing diesel’s popularity. Indonesia’s ambitious plans to increase the biodiesel blend in fuel products aim to reduce dependency on fossil fuels, stimulating domestic agricultural sectors in the process. This strategic pivot not only helps the environment but also bolsters energy security, as the country seeks to harness its local resources for fuel production.
Moreover, the pandemic has accelerated changes in consumer behavior, with logistics and transportation sectors exploring alternative energy solutions. As businesses adapt, diesel’s once-solid foothold in Indonesia’s energy landscape seems increasingly precarious. In this evolving market, the shift to cleaner energy aligns with global trends and emphasizes Indonesia’s commitment to sustainable development, hinting at a future with diminished reliance on diesel fuel.
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