Petrol prices at the pump will be switched from its current fixed price of RM2.70 per litre to a floating amount according to the month’s average current market rates with a fixed subsidy of RM0.30 per litre. This floating amount will be capped to a maximum of RM2.70 per litre (current price), which means the 30 sen subsidy will increase to cover the higher cost of fuel if it increases over RM3.00 per litre.
The government said June 2008’s subsidy was an average of 64 sen per litre as crude oil averaged at US$132 during the month, but it has peaked at US$149 recently. According to calculations provided by the dailies based on August 1st’s crude oil price of US$128.19 per barrel of 159 litres, the price of RON97 petrol could have dropped from RM2.70 per litre to RM2.64 per litre (RM2.62 production cost based on crude oil price + transport, commission and misc cost of RM0.32 per litre – subsidy of RM0.30 per litre).
It’s time to monitor August 2008’s average monthly crude oil price closely. What we want is for average oil prices to drop to USD128 and below, then we will be able to see a nice reduction in petrol prices on the 1st of September.