Mechanism selection of subsidized diesel oil pricing policy in Indonesia using analytic network process

Indonesian government still provides subsidies for fuel, especially for diesel that is used in certain sectors. An increase in fuel oil consumption, particularly the subsidized diesel, results in the higher amount of the subsidy that should be delivered by the Indonesian government, which in turn makes subsidy budget for fuel takes a lot of space on the allocation of state budget. Therefore, we need the proper and more effective and efficient fuel pricing mechanism in Indonesia, especially for diesel. Analytic Network Process is the method that has been used to select the proper subsidized diesel pricing mechanism, with its related criteria filtered through the Delphi method. Five experts from a few of the Indonesia ministries related to the determination of fuel pricing policy have been involved in this research as the respondents to the distributed questionnaires. The outcome of this research is the criteria and its order of priority that must be considered by the Indonesian government in determining the price of subsidized diesel. Finally, the result of this research states that "Price Smoothing Using Price Stabilization Fund" (PSOF) is considered to be the best subsidized diesel pricing mechanism with highest priority score out of three pricing mechanism scenarios according to the method of Analytic Network Process.