Rising global oil prices still affect unsubsidised fuel prices, says analyst

Akademi Nusantara’s Azmi Hassan addresses the perception that prices should not rise as Malaysia is an oil-producing country.

Akademi Nusantara’s Azmi Hassan said the increase in global oil prices from US$60 (RM236) to US$65 per barrel previously to around US$110 currently has made price adjustments unavoidable.

He said while the public generally understands that fuel prices have risen due to higher global oil prices, there remains a perception that prices should not rise as Malaysia is an oil-producing country.

“While Malaysia exports crude oil and earns revenue, it still imports refined fuel for domestic use, making it exposed to global price movements,” Bernama reported him as saying.

Azmi said targeted measures such as the RON95 subsidy under the BUDI95 initiative help mitigate rising fuel costs.

“Initiatives like BUDI95 can help control logistic costs for ordinary people. The RM1.99 price is basically a giveaway to the people,” he said.

However, Azmi cautioned that the current subsidy bill, estimated at RM3.2 billion a month, may not be sustainable in the long term.

“We can’t just enjoy the RM1.99 forever, with increasing oil prices worldwide,” he said.

Azmi said Malaysia remains in a stronger position than some countries, noting that inefficiencies in other oil-producing nations have affected their fuel supply systems.

He said differences in fuel pricing between regions are based on usage patterns, noting that diesel remains subsidised in Sabah and Sarawak due to its widespread use.

“The government is still maintaining lower diesel prices in Sabah and Sarawak because RON95 in the peninsula is maintained at RM1.99.

“Diesel is widely used in those states, not only for logistical purposes but also by both the private and public sectors.

“That’s why diesel has been subsidised in Sabah and Sarawak. On the other hand, petrol is the most widely used fuel in the peninsula,” he said.

Azmi stressed that any increase in diesel prices in Sabah and Sarawak could have a more severe impact on living costs.

“If there is an increase from RM2.15 in Sabah, even by 10 or 20 sen, there will be an impact on the cost of living due to diesel’s widespread use across all sectors in Borneo.

“The impact is going to be severe in Sabah and Sarawak in terms of higher cost of living and expenses,” he said.

On March 12, the finance ministry announced an increase in unsubsidised fuel prices in Peninsular Malaysia amid rising global oil prices triggered by the US-Iran conflict.

From March 12-18, the retail price for RON97 rose by 60 sen to RM3.85 per litre and unsubsidised RON95 by 60 sen to RM3.27 per litre, while diesel rose by 80 sen to RM3.92 per litre.

In the latest revision, effective March 19 to March 25, RON97 increased further to RM4.55 per litre, while diesel in Peninsular Malaysia rose to RM4.72 per litre. Unsubsidised RON95 remained unchanged at RM3.27 per litre.

Diesel prices in Sabah, Sarawak and Labuan remained unchanged at RM2.15 per litre.