Power based relationships in Indonesian LPG supply chain: A conceptual framework

The consumption of liquefied petroleum gas (LPG or propane) for household cooking has been raising considerably since 2007 when the Indonesian government terminated the subsidy for kerosene and switched the subsidy to LPG. This study presents a thorough assessment of existing Indonesian subsidized LPG supply chain in order to evaluate its performance. The results indicate that the Indonesian LPG supply chain is characterized by an immense power asymmetry, and in turn creating concentration of power for the state-owned oil and gas company. The relationships between this company and its buyers in the LPG market is shown to be power based, and will be explained in detail. By comparing with similar situation in other countries, this study also presents the possibility of performance degradation due to the power based relationship. Then, this study proposes a research question: how the existing power imbalance influences the performance of LPG supply chain. Finally, a conceptual framework to answer this question is presented.