Trump's energy policies and Indonesia's opportunities
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Investor Daily - Kebijakan energi Trump dan peluang Indonesia
30 January 2025
By Indah Ayu Pujiastuti, Rangga Prakoso, and Euis Rita Hartati
Several policies of US President Donald Trump in the energy sector are predicted to benefit Indonesia, a major producer of fossil commodities, especially coal. However, the US decision to withdraw from the Paris Agreement will not alter Indonesia’s commitment to achieving carbon neutrality by 2060.
Donald Trump has consistently supported policies to optimise oil and gas production in the US since his campaign. With the slogan “drill, baby, drill,” the US will aggressively expand its oil and gas drilling. This is predicted to reduce global oil prices. As US oil production increases, the global oil supply will rise. As of October 2024, US oil production reached 18 million barrels per day, contributing 20% to global crude oil production and making it the largest oil producer in the world.
Trump also mentioned that coal is a crucial energy source for the US, proposing to build new power plants that use coal as energy reserves, especially to meet electricity demand. He claims that the US has the largest coal reserves in the world, which can be relied upon in case of gas and oil supply disturbances.
Currently, the US still relies on coal for 16% of its electricity generation.
The reduction in global oil prices will benefit Indonesia as an oil-importing country, reducing its oil import burden. According to data from the Energy and Mineral Resources Ministry, Indonesia's oil production reached 221 million barrels in 2023, while national fuel consumption was 505 million barrels. The imported oil used across various sectors reduced the country's foreign exchange reserves by Rp396 trillion last year.
Meanwhile, the extensive use of coal in the US will impact global coal consumption, according to Indonesian Coal Mining Association (APBI) Acting Director Gita Mahyarari.
“Even though the geopolitical factors are favourable for fossil energy, we need to assess if they will positively impact prices. The US is a coal producer, but they still import small volumes,” she told Investor Daily on Wednesday (29/1/2025)
Even though Trump’s policy will likely strengthen coal use, Gita continued that Indonesia also has a target to develop new renewable energy (NRE) and reduce emissions.
“So, we must be wise in using coal. The most important thing is to develop green coal technology,” she stated.
An energy economy observer from Universitas Gadjah Mada (UGM), Fahmy Radhi, explained that Trump’s policy will benefit Indonesia as a coal exporter.
“The export can be from Indonesia,” Fahmy said to Investor Daily in Jakarta on Wednesday (29/1/2025).
However, Fahmi emphasised the need for anticipative steps towards the policy if there is export demand to the US, as Indonesia has yet to export coal to the US. “The supply chain, permits, and transportation must be prepared. Until now, there have been no coal exports to the US,” he explained.
Electric cars continue
Meanwhile, Trump will also revoke the mandate to use electric vehicles in the US. In response, Fahmy stated that the policy does not pose a problem for Indonesia.
“Not only the US produce electric cars, but also other countries, such as China and Korea. Indonesia’s ambition to develop its electric car ecosystem will not rely on the US,” he stated.
Fahmy explained that Indonesia will continue to develop its electric car ecosystem independently of the US. “There are still other countries that produce electric cars,” he stated.
The policies issued by Trump will not affect domestic downstreaming. Indonesia can continue its downstreaming efforts to boost the national economy.
Fahmi believes that downstreaming does not rely on the US market. “There are several derivative products from Indonesia with the largest market in Europe. So, I do not think Trump’s policies will be significant,” he stated.
Meanwhile, Centre of Economic and Law Studies (Celios) Executive Director Bhima Yudhistira explained that the impacts of the revocation of the EV mandate include a reduction in critical mineral demand for EV batteries, a loss of investors from the US, stagnant international financing, and nickel downstreaming in Indonesia being dominated by Chinese companies.
He explained that the reduction in demand for critical minerals will cause the prices of nickel, copper, tin, and bauxite, which are essential raw materials for electric vehicles, to plummet.
"Currently, the international market reference price for nickel has decreased by 3.7% year-on-year (YoY), while cobalt's price has dropped by 16.6% over the same period. The impact of these price reductions over the next two months is expected to alter the business plans of electric vehicle companies in the US, potentially affecting raw material supply contracts," Bhima told Antara.
Next, he mentioned that investment by US companies in nickel smelters and battery factories is expected to decline. Previously, the Inflation Reduction Act (IRA) policy was anticipated to encourage US investors to alter the governance of mine downstreaming in Indonesia.
Bhima stated that international financing for energy transition and transportation electrification from the US to Indonesia will also be reduced or halted. Within the Just Energy Transition Partnership (JETP), there are roles focused on the decarbonisation of the mineral industry and the enhancement of domestic electric vehicle components.
If the US has revoked the EV mandate and withdrawn from the Paris Agreement, it is unlikely that relevant partnerships for energy transition will continue. Consequently, the nickel downstreaming industry in Indonesia is expected to be dominated by Chinese companies.
Bhima noted that China's economic slowdown is affecting the price of processed nickel, particularly the raw material for stainless steel produced in Indonesia. "The export performance of processed nickel this year is forecasted to plummet, which will also decrease the trade surplus," he stated.
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