Oil prices raise question of fiscal sustainability

Taking a hit: The increase in oil prices will push the government back by about RM780mil in fuel subsidies, assuming the retail price of RON95 is unchanged at RM2.05 per litre and diesel at RM2.15 per litre.

PETALING JAYA: Developments surrounding the Russia-Ukraine crisis have sent oil prices past the US$120 (RM501.78) per barrel mark, putting into question the possibility of a readjustment of the fuel subsidy, given the rising pressure on government finances.

Rising oil prices are generally positive for a net oil and gas exporting country like Malaysia. Reports estimate that for every US$1 (RM4.18) per barrel average increase in oil prices, the government stands to add some RM370mil in revenue.