FROM mandating minimum stockholding, diversifying suppliers to establishing more open trade, experts outline their proposed medium and long term measures to reduce Malaysia’s vulnerability to future oil shocks and supply chain disruptions.
He points out that the country may need to mandate minimum stockholding obligations for oil companies such as 60 to 90 days of emergency stocks, establish a government-managed petroleum reserve and create transparent mechanisms for stock release during crises.
“This reform directly prevents physical shortages and price spikes, making it the highest priority. Equally important is diversifying energy sources given that Malaysia’s power grid remains overly dependent on natural gas (about 40%) and coal (about 30%), creating vulnerability to both price shocks and supply disruptions.”
At the same time, he adds that key actions include accelerating grid-scale solar with battery storage, diversifying natural gas import sources, and exploring regional hydropower imports via the Asean Power Grid.
“Industrial adjustment such as phasing out energy subsidies and promoting non-oil exports is important but less urgent, as it takes years to yield results.
“The optimal sequence is build buffer stocks first to survive immediate crises, energy diversification second to reduce long-term exposure, and industrial adjustment third to build enduring resilience.”
Centre for Market Education (CME) chief executive officer Carmelo Ferlito says in the medium term, Malaysia needs better preparedness, not more ad hoc intervention.
“This includes clearer data on sectoral exposure, more flexible targeted assistance, improved logistics infrastructure, and faster customs and port procedures to reduce unnecessary delays and costs.”
For the longer term, Carmelo stresses that the priority should be economic resilience; this means allowing energy prices to reflect scarcity, while protecting vulnerable households through transparent transfers or purpose-vouchers.
“It also means encouraging firms to diversify suppliers, invest in more efficient logistics and reduce dependence on a single input, route, or source country.”
He also says that Malaysia should build stronger strategic buffers where they make economic sense.
“However, buffer stocks should be used carefully. They can help during temporary disruptions, but they are not a substitute for price signals or market adaptation. If buffer stocks become a permanent tool to suppress prices, they will create the same problem as subsidies.
“The broader reform is to create an economy that can adjust quickly: more open trade, fewer regulatory bottlenecks, competitive logistics, flexible labour markets and less dependence on politically determined prices.”
South-East Asian Futures Initiative Centre (Seafic) policy researcher and analyst Dr Mikhail Rosli says identifying critical inputs is crucial when it comes to supply chain mapping.
“So a great example is how currently in our ongoing crisis that we’re using a lot of the supply chain mapping that we utilise during Covid-19 pandemic. So having this experience will also help us in the future.”
In the long term, Mikhail also echoes the need for diversifying suppliers.
“Right now we’re discovering things like 70% of our imports of this specific product (for example) is coming from Hormuz. And I think that means that we should start thinking about diversifying suppliers, at least to help these (importing) firms.
“We can have the macro conversations about green energy and to bringing some of these supply chains home to Malaysia.”
On a suggestion about developing the use of palm oil biodiesel as an alternative to fossil fuel, Mikhail says he has two concerns – scale and concentration risk.
“The first thing is scale. Palm oil biodiesel will only replace some uses of fuel. It wouldn’t be able to replace for aviation fuel and it won’t be able to replace urea for fertiliser. So the scale of that as a response might be limited.”
Secondly, Mikhail says if it is to be a central pillar of energy security, the shift can concentrate more national risk in the same commodity.
“Palm oil is already an essential export commodity and it’s already important for rural incomes. So if you also want to build energy security with palm oil as a pillar, then you’re concentrating a lot of Malaysia’s security on this one commodity.
“So might not be the wise step forward, but it will be useful at the margin.”
