Projecting the Impact of Fuel Price Increases on Rural Economic Resilience and Community Welfare in Kudus Regency: A Technocratic Perspective on Regional Development

Abstract

Fuel price adjustments in Indonesia generate cascading economic effects, particularly in rural regions dependent on agriculture, tobacco processing, and micro, small, and medium enterprises (MSMEs). Kudus Regency, Central Java — an economy simultaneously anchored by a dominant cigarette-processing industry and a substantial agrarian base — faces distinctive challenges in sustaining economic stability and household welfare amid rising production, distribution, and consumption costs triggered by energy price shocks. This study analyzes the projected impact of fuel price increases on the economic resilience and welfare of rural communities in Kudus Regency and formulates evidence-based policy recommendations. It adopts a combined quantitative-qualitative design, drawing on secondary data and literature synthesis, Input-Output (I-O) analysis, and Structural Vector Autoregression (SVAR) with Impulse Response Function (IRF) evidence to trace how energy-price shocks transmit through regional economic sectors. Findings indicate that fuel price increases raise operational costs in agriculture, inflate transportation expenses for tobacco-factory workers, compress micro and small enterprise margins, and heighten the risk of food-price inflation and near-poor households falling below the poverty line. Conversely, the regional Tobacco Excise Revenue-Sharing Fund (DBHCHT) and strengthened regional inflation-control mechanisms constitute potentially effective mitigation instruments, provided they are supported by accurate beneficiary targeting and cross-sectoral coordination. The study concludes that adaptive, evidence-based regional policy oriented toward strengthening rural economic resilience is essential for sustaining inclusive regional development in energy-dependent agrarian-industrial regencies such as Kudus.