Tenfold increase in subsidies to counter crude oil prices

A TOTAL of RM28bil in fuel subsidies will be paid out this year due to a rise in the global price of crude oil, says Deputy Finance Minister I Datuk Mohd Shahar Abdullah.

“Crude oil was at US$85 (RM359) per barrel in January this year, which was higher than the US$55 (RM232) per barrel for the same period last year.

“Owing to this, the government was forced to bear a drastic tenfold increase in subsidies for petrol, diesel and liquefied petroleum gas.

“This meant an increase in subsidies from RM200mil in January last year to RM2bil in January this year,” he told Datuk Amiruddin Hamzah (Pejuang-Kubang Pasu).Mohd Shahar said the government would have to pay subsidies of up to RM28bil this year if the crude oil price remained above US$100 (RM422) per barrel, compared to RM11bil for 2021.

He added that Malaysians were paying RM2.05 for a litre of RON95 fuel.

However it would cost RM3.70 per litre if there were no subsidies.

“As for diesel, it cost consumers RM2.15 per litre although the actual non-subsidised price is RM4 per litre,” said Mohd Shahar.

He said the price of RON95 in Malaysia was still low compared to other countries such as Saudi Arabia (RM2.61 per litre), Thailand (RM6), Indonesia (RM3.78) and Singapore (RM9.20).

To a supplementary question by Amiruddin, Mohd Shahar said that although Malaysia had benefitted from high oil prices as an oil producing nation, the profits were used to balance out the cost of fuel subsidies.

He said the government estimated a profit of RM44bil based on Brent crude oil sold at US$68 (RM287) per barrel.

“But as at March this year, Brent crude oil hovered at about US$96 (RM405) per barrel,” he added.

Mohd Shahar said the figures given were merely an estimate, as the true cost could only be calculated after taking into account the impact of the Russian-Ukraine conflict.

He added that the government was currently studying ways to implement more targeted subsidies for specific segments of society.