Brent Oil Prices, Demand, and Oil Emissions in Indonesia: Long-Term Evidence

Abstract: This study analyzes the effect of Brent oil price and oil demand on oil emissions in Indonesia during the period 1990-2023. This study was analyzed using multiple linear regression, while the data were obtained from the Energy Information Administration (EIA), World Development Indicators (World Bank). The results showed that Brent oil price has a positive and significant effect on oil emission, as well as the variable of oil consumption or demand has a positive and significant effect on oil emission. Although economic theory predicts that higher oil prices will reduce energy consumption, this effect is less pronounced in Indonesia due to government fuel subsidies. This finding has several important policy implications. First, the government needs to evaluate its fuel subsidy policy, which has been suppressing domestic prices, as large subsidies weaken the mechanism of controlling emissions through energy prices. A more realistic energy price adjustment could encourage consumption efficiency and reduce emissions. Second, the high oil consumption in the transportation sector emphasizes the importance of developing efficient and environmentally friendly public transportation, as well as encouraging the use of energy-efficient vehicles. Third, energy diversification towards renewable sources is a strategic step to reduce dependence on oil and reduce long-term emissions. Overall, the integration of economic, energy, and transportation policies is necessary for sustainable economic growth without increasing environmental pressures.