This paper is concerned with identifying and modelling the macroeconomic contribution of the oil sector to the Indonesian economy. A brief overview of macroeconomic developments for Indonesia is conducted for the period 1970-1991, focusing upon the contribution of oil revenues to GDP, the current account and government revenue. In addition a simple theoretical macroeconomic model, incorporating oil, is presented and used for numerical simulation purposes, to identify and analyse potential macroeconomic developments for Indonesia arising from oil related shocks. The overview suggests that oil price shocks are of particular interest in the context of Indonesia, as are, therefore, the simulation results derived from this case. Consideration is also given to the effects upon macroeconomic outcomes, arising from various policy responses to oil related shocks. In particular emphasis is given to the use of oil revenues for the purpose of stimulating domestic demand or the supply side of the economy, and the adoption of a more, or less, export oriented policy towards oil production. © 1994.