The streets of Jakarta are ablaze tonight. Thousands of Indonesian students have clashed with police over a 30% surge in subsidised fuel prices, a necessary austerity measure to stave off a widening budget deficit. But as flames rise in Southeast Asia, London’s financial district watches with a mixture of grim satisfaction and pointed lessons. Our own energy security model, built on market pricing and fiscal discipline, is showing its mettle.
The Indonesian government, backed into a corner by mounting subsidy costs, raised petrol and diesel prices on Saturday. The move sparked immediate outrage. Students, long a barometer of public frustration in the world’s third-largest democracy, took to the streets. Tear gas, water cannon, and arrests followed. The protesters’ demand: reverse the price hikes or face a prolonged uprising.
Yet the root cause is not simply greed. Indonesia, like many emerging economies, has long propped up fuel costs to shield its population from global price volatility. But the bill is staggering. Subsidies are expected to reach £30 billion this year, consuming 20% of all government spending. The International Monetary Fund has been blunt: Indonesia must cut its addiction to cheap fuel or risk a sovereign debt crisis.
Enter the United Kingdom. Our own approach to energy security, forged in the crucible of the 1970s oil shocks and refined through Thatcherite reforms, relies on market prices. The logic is simple: when oil costs more, consumers feel the pinch, and demand adjusts. The government steps in only for the most vulnerable, through targeted support like the Warm Home Discount. This is not compassion it is efficiency. And it works.
Consider the data. UK household energy bills have risen by 54% since 2021, driven by Russia’s invasion of Ukraine. Yet the riots have not materialised. Why? Because our system distributes pain in a way that aligns with market realities. High prices encourage conservation, investment in renewables, and a shift away from fossil fuels. Indonesian subsidies, by contrast, mask the true cost, encouraging overconsumption and draining the treasury.
The capital markets have taken notice. British gilts have rallied this week, with the 10-year yield falling 12 basis points to 4.21%, as investors prize our fiscal credibility. Meanwhile, the Indonesian rupiah has slumped 3% against the dollar, and Jakarta’s stock market has shed £8 billion in value. Capital flight is a blunt instrument, but it punishes profligacy.
Critics will argue that Britain’s model is heartless. They will point to the 6.7 million households in fuel poverty, a figure that has risen with prices. But the alternative, as Jakarta demonstrates, is worse. Subsidies create a permanent underclass dependent on state handouts, while bankrupting the nation. The UK’s approach, with its focus on long-term efficiency, is the foundation of our economic stability.
This is not a moment for smugness. The energy transition remains fraught with challenges, and our own grid faces pressures from intermittent renewables. But the Jakarta riots are a stark reminder of what happens when governments prioritise short-term popularity over market discipline. The City of London, ever the pragmatist, is betting on resilience.
