Relation of energy use to price inflation for sustainable development policy: does fossilflation occur in Indonesia?

Purpose This study aims to analyze the effect of energy consumption by energy source toward the price level of fossil fuels in Indonesia. Design/methodology/approach Using data from the Energy Institute and the World Development Indicator, this study applies the error correction model method to analyze the effect of energy consumption on price levels, both in the short and long run. Findings The results of this study show that the price of oil, which is one of the energy sources, has increased. In the long run, coal consumption increases oil prices, while geothermal consumption does the opposite. On the other hand, in the short term, only oil consumption increases oil prices. This study emphasizes the importance of renewable energy development, especially geothermal energy and hydroelectricity, for energy price stability in Indonesia. Originality/value To the best of the authors’ knowledge, this study is the first to examine the effect of Indonesian energy consumption on oil prices. In addition, this study breaks down the analysis of energy consumption by source, making it a valuable reference for the development of renewable energy in Indonesia.