PETALING JAYA: The recent oil shock has exposed a less visible vulnerability in Malaysia’s energy balance.
Kenanga Research said in a report that although Malaysia remains a net energy exporter, its fiscal position is exposed to refined product prices through subsidies, while its trade position is short on crude and long on liquefied natural gas (LNG) exposure.
“The West Asia crisis reinforces the case for reducing the economy’s exposure to subsidised fossil fuel consumption, while preserving fiscal capacity for the energy infrastructure that rising electricity demand requires,” the research house told clients in the report.
An analyst told StarBiz: “Being a net energy exporter does not necessarily mean being energy-secure. Malaysia increasingly faces a structural mismatch.”
He said as domestic crude production declines and dependence on other sources increases, a supply shock can raise inflation and subsidy costs.
In its report, Kenanga Research said the transmission from oil prices to the Malaysian economy has changed “at the margin”.
“The familiar pattern was straightforward. Higher oil prices lifted export revenue and Petroliam Nasional Bhd (PETRONAS) receipts, and supported the external position. That benefit still exists,” it said.
However, what is new is the offsetting fiscal leg, the research house pointed out.
Higher oil raises the unsubsidised pump price while the subsidised price stays fixed, Kenanga Research said, adding that the fiscal transfer therefore widens automatically.
It noted that the Finance Ministry (MoF) stated the fuel subsidy bill at RM0.8bil a month in January and February, RM5bil in March and April, and RM4bil in May and June as prices moderated.
“For a steady state, MoF estimates a monthly cost of about RM3.5bil with Brent near US$90 per barrel (bbl). Applying our estimated pass-through to the first-half outturn implies a 2026 total of roughly RM38bil to RM43bil, with a lower bound of US$80 and an upper bound of US$90.”
Kenanga Research added that Malaysia is net short oil on the fiscal account.
It said the government estimates that each US$1 per bbl move raises federal petroleum revenue by RM300mil a year, excluding PETRONAS dividends.
“We estimate the subsidy cost beta at about RM1.05bil a year,” the research house said, adding that the revenue offset covers less than a third of the increase.
Kenanga Research said: “We put the net fiscal exposure at roughly RM750mil a year for each US$1 per bbl, or about RM7.5bil for a US$10 per bbl move.”
The research house said its analysis puts the RON95 subsidy strike at approximately US$44 per bbl Brent and the diesel strike at around US$48 following the RM2.10 Budi Diesel price, both on a futures basis.
“Neither strike is close to our US$80 average house view for 2026, so the exposure persists even without another major oil shock.”
The research house said rebalancing Malaysia’s energy exposure is the “durable” fix.
The options differ sharply in capital intensity, balance sheet location, import content and time to first contribution, Kenanga Research said, adding that it assessed them on these dimensions rather than by technology.
It said the longer-term ringgit benefit comes from a stronger external balance and rising economic complexity as energy investment deepens domestic capacity.
However, the build-out initially increases imports of capital goods, creating a near-term drag on the trade balance.
The research house has retained its US dollar-to-ringgit forecast at 3.95 for end-2026.
