Subsidy policy of fuel oil always becomes a dilemma, which is not only related to the budget burden but also related to its effectiveness and suistained avaibility offuel oilstock (energy conservation). In addition, because of the wide linkages of fuel oilto other economic sectors, so the change in subsidy policy of fuel oil - that will affect the domestic price of fuel oil - could have wide and crucial impact on many sectors. This paper is intended to analyze the impact of the increase of fuel oil domestic price asa consequence of the decrease of fuel oil subsidy on economic and environmentsectors. Impact analysis on economics sectors will be observed on three aspects ; macroeconomic (economic growth, employment, and inflation), International trade(export, import, and term of trade), and fiscal (government,s income, government'sexpenditure, and government's saving). While, the environment impact will be observed on its change on pollutants resulted from burning process of fuel oil to gain energy. This p