More Reasonable Fuel Prices For Malaysians


After surging in the month of October, the international oil prices have been declining steadily to a 14-month low. The Brent crude futures touched a low of US$49.93 per barrel at one point upon resuming business after the Christmas break, the first time the price has gone below the $50 threshold since July 2017.

Following the drastic fall of international oil prices, there have been calls for the government to lower domestic fuel prices to more acceptable levels to reflect the actual market prices while lessening the burden of the people.

It has been estimated that when the US crude prices drop to $45 per barrel, RON95 should be priced at RM1.90 per liter. Many feel that prices of RON97 and diesel should also go down simultaneously.

Malaysia’s RON95 retail price is currently fixed at RM2.20 per liter while diesel is priced at RM2.18. These prices have been fixed by the new Pakatan Harapan government since June 7 at a time the international oil prices were on the rise. The government has shouldered more than RM5.8 billion in fuel subsidies to make up for the price differences between May and November this year.

As fuels are currently priced according to an automatic pricing mechanism, namely the average oil prices and exchange rates of the preceding month, the retail prices may not timely reflect the actual market trends.

However, as international oil prices have gone down for some time now, domestic fuel prices should be lowered so that consumers will not be made to subsidize the government instead.

In view of this, finance minister Lim Guan Eng has announced that the government will lower the retail prices of RON95 from January 1, and re-introduce the free-floating mechanism with prices to be reviewed on a weekly basis so that they can keep up with changes in the international markets.

From what we understand, the government would review retail fuel prices on a weekly basis when international oil prices trend lower, and cap them at RM2.20 when international oil prices swing upwards, until the RON95 subsidy for targeted groups come into effect next year.

Lowering fuel prices is a boon to consumers although petrol station operators may not be happy with the free-floating mechanism. These operators have warned that consumers may face the problem of short fuel supply come January due to the reluctance to replenish the inventory at month-end as prices will drop soon. The operators are unable to decide the inventory, which is determined by petroleum companies.

The government has pledged to allow fuel prices to fluctuate with market prices so that Malaysians can enjoy more reasonable fuel prices. Nevertheless, the concerns of gas station operators must also be taken into consideration, and the government must strike a balance between the two ends.-Sin Chew Daily