KUALA LUMPUR: Malaysians could face higher unsubsidised fuel prices if global oil prices continue to climb.
Petroleum Dealers Association of Malaysia (PDAM) president Datuk Khairul Annuar Abdul Aziz said prices of unsubsidised fuels such as RON97, unsubsidised RON95 and diesel could be impacted if the upward trend continues.
“It is still too early to estimate by how much, as it depends on whether the increase is sustained or temporary,” he said.
According to Khairul Annuar, Malaysia’s pump prices are based on the Mean of Platts Singapore (MOPS), which reflects refined fuel prices in the region.
“MOPS typically reacts with a short lag compared to Brent, as it depends on actual refined product trades.
“In most cases, any sustained increase in crude may take about one to two weeks to be fully reflected at the retail level, depending on the weekly average and exchange rate movements,” he added.
From the petrol retail perspective, Khairul Annuar said PDAM’s main concern would be the working capital exposure.
“When diesel and RON97 wholesale prices increase, dealers must inject more capital to maintain normal stock levels.
“Merchant Discount Rate (MDR) charges also rise because they are calculated based on pump price. Dealers cannot pass this cost to consumers, and our margins remain fixed,” he said.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the impact of pump prices would depend on the severity and duration of the conflict.
“It depends on the government’s ability to provide subsidies to all Malaysians,” he said.
“If the current scheme can be retained, Malaysians are pretty much insulated from the oil price shocks.”
Afzanizam did not rule out increasing fuel prices if Brent prices remained elevated.
Aside from oil, he said logistics and aviation appear to be key sectors that would have an immediate impact.
Prime Minister Datuk Seri Anwar Ibrahim has since said that the government would try to maintain the price of RON95 petrol for Malaysians at RM1.99 per litre despite global market uncertainty.
“We will give the maximum effort to hold off (on raising prices).
“But (the market) is beyond our control, and we cannot guarantee there won’t be any price increase,” he said.
The unsubsidised fuel prices in Malaysia may increase if global oil prices climb to between US$80 (RM314.68) and US$100 (RM393.35) a barrel for a prolonged period, say economists and industry players.
This comes amid escalating tensions in the Middle East and the closure of the Strait of Hormuz, which moves around 20 million barrels per day of crude and refined products.
Sunway University economics professor Dr Yeah Kim Leng said both factors were expected to escalate oil prices.
“Should oil prices hit these rates for a prolonged period, the government might have to raise pump prices gradually to maintain fiscal sustainability,” he said.
Prof Yeah said that Malaysia, as an energy exporter, could use higher export revenue to moderate the impact on pump prices to the extent that the extra spending on fuel subsidies does not jeopardise the country’s fiscal balance.
“Those using market-based fuels will be subject to the prevailing prices, but the bulk of consumers and businesses will continue enjoying subsidised prices,” he said, adding that this may see some increase if oil prices escalate for a prolonged period.
Prof Yeah also said higher energy prices would result in greater cost-push inflation across all sectors of the economy.
“This will take time to manifest, depending on the magnitude and duration of oil price spikes,” Prof Yeah added.
Tensions in the Middle East escalated after the United States and Israel launched strikes on Iran on Feb 28, which Israel described as a “pre-emptive attack” against its long-time adversary.
The attacks followed a significant build-up of US military presence in the region aimed at pressuring Teheran to scale back its nuclear programme.
As of 5pm yesterday, Brent crude oil traded at US$77.40 (RM304.45), peaking at US$78.03 (RM306.93) at one point.
