5 Oct 17

Does fuel cost affect traffic congestion?

A comprehensive study of the Australian National University (https://acde.crawford.anu.edu.au/sites/default/files/publication/acde_crawford_anu_edu_au/2017-08/2017-10_burke_ea_wp_0.pdf) is giving us more insight about the elasticity of traffic jams in function of fuel price. The study was conducted in Indonesia, on 19 major toll roads and contains 7 years of data. It teaches us, and our governments one lesson : the importance of making good policies and correcting policy mistakes as quickly as possible.


The 3 authors of the study have selected Indonesia to do their research. To those readers who know Indonesia, it’s a fascinating choice. The Indonesian traffic jams are notorious and commuters spend literally hours per day on their way to work in the morning and back home in the evening. It’s unpleasant, has an important impact on the productivity of the country. In addition, there are no valid alternatives. Public transport is poor, the old busses are uncomfortable (although, fair to say, they are being replaced by more reliable and comfortable ones) and  the metro system (MRT) is still under construction. But this is not the main particularity about Indonesia.

Subsidised fuel prices

Indonesia has for years now kept the fuel prices below market price. In 2012, for example, one liter of gasoline in Indonesia costed the equivalent of 0.47USD. The price of the crude oil at that time was 0.69USD. In order to sustain these low prices, the Indonesian government had to use funds from the central budget to support Pertamina, the state owned oil company. The system was unsustainable from an economic perspective and consequently, the government raised the prices in 2013 (gasoline by 44% and diesel by 22%) and again in 2014 (respectively 31% and 36%), continuing however additional subsidies for Diesel.

The correct research ground

This is exactly why Indonesia is the right country to have a closer look at how fuel prices influence behaviour of the car users. If people decide to drive less when fuel prices go up, even in a country where alternatives are not available, it implies at least a similar effect on people who have access to other ways of commuting, such as car sharing and public transport.

The conclusion

The use of the examined roads kept on growing, regardless of the price increases, but much slower than before : the growth of the vehicle flows was half of what was to be expected in a continuous model, not interrupted by price increases. Add to this the fact that many of the examined roads had already reached maximum saturation and the effect would have been disastrous for Indonesia. The country is expected to take additional measures : since 2015, occasional price changes in function of the crude oil price have been regularly applied (both upwards and downwards). Indonesia is also looking at its neighbour. The Singaporeans have successfully implemented road tolls and an expensive car purchasing scheme that has drastically reduced traffic jams. But then again, alternatives are available in Singapore, with one of best performing public transport systems in Asia.

For the Indonesian Fleet Manager

Indonesia has surprisingly large fleets, especially in the agricultural, chemical and tobacco industries. Not only is it difficult to control a fleet in one of the largest and most populated countries, but even a well managed fleet is subject to the many traffic jams, especially in Jakarta. The solution needs to be a combined effort between government (public transport), the mobility industry (car sharing) and the corporates (home working, carpooling, variable working hours). A big challenge for the Fleet Manager.






Authored by: Yves Helven