KUALA LUMPUR: The impact of rising diesel prices has begun to surface across industries, with businesses warning that the coming months will be more challenging as cost buffers run out.
Industry players said many companies had so far absorbed higher costs, cushioning the impact using existing stock and margins, but that buffer is now thinning.
“We are already seeing cost increases across the board.
“About 45% of businesses are still absorbing these costs, but that means they are bleeding,” said Small and Medium Enterprises Association (Samenta) vice-president Edwin Ng.
Speaking at a roundtable yesterday organised by the Institute for Strategic Analysis and Policy Research (Insap) – a think tank of MCA – he said a recent survey among a small group of SME operators showed 93% of them reporting higher costs, with many having less than six months of cash reserves.
He noted that structural issues in subsidy delivery are compounding the problem.
“Businesses highlighted gaps in the targeted diesel subsidy system, including exclusions of certain sectors and delays in approvals and reimbursements.
“Logistics operators, contractors and small transport firms are among those forced to pay upfront while awaiting claims, putting further pressure on already thin cash flows,” said Ng.
From the supply chain perspective, SME Association of Malaysia treasurer Eng Kin Hoong said the impact of rising costs has been more evident since earlier this month, with delays in raw materials and growing concern over diesel availability, even if supply remains intact.
“If costs continue rising, businesses will have no choice but to pass them on,” Eng said.
In agriculture, Federation of Vegetable Wholesaler Associations Malaysia president Steven Lee said the effects are already emerging, with fertiliser and diesel costs rising, forcing some farmers to scale back production.
“Prices may not seem obvious to consumers yet, but supply is tightening and costs have risen significantly in the past few weeks,” he said, adding that suppliers are increasingly unwilling to lock in prices amid volatility.
While subsidies are available for certain uses, gaps remain.
For instance, Lee said diesel used for transport lorries may be covered but smaller vehicles such as four-wheel drives, commonly used to move produce from farms in difficult terrain, are not.
“Farmers have no choice but to continue using these vehicles as lorries cannot access certain areas,” he said.
Insap director Woon King Chai said a recent household survey found that 60% of respondents are already feeling a significant impact from rising costs, particularly in food, transport and household goods.
He said the findings are not isolated sentiments but are consistent with what is being observed across supply chains, where cost increases are gradually filtering through from producers to consumers.
“Many of the price adjustments have not fully reached the end consumer yet because businesses are still absorbing part of the increase,” he said, adding that SMEs are beginning to reach their limits amid sustained cost pressures.
Woon said the current phase of the crisis reflects a “lag effect”, where earlier increases in fuel and input costs have yet to translate into retail prices fully, but are expected to become more visible in the coming months as inventory cycles reset.
MCA president Datuk Seri Dr Wee Ka Siong said diesel and electricity remain key cost drivers across the economy, warning that sustained volatility would make it increasingly difficult for businesses to plan and operate.
He said most sectors, from transport and construction to manufacturing, rely heavily on fuel and energy inputs, and even small price movements can cascade through the supply chain.
“If these continue to fluctuate or rise sharply, businesses will not be able to cope, and costs will inevitably be passed down.”
He said the concern is not only the level of prices, but the unpredictability of adjustments, which complicates long-term business planning and contract pricing.
“We need some form of mechanism that provides stability. Without it, every adjustment creates a ripple effect across the economy,” he added.
