Minister of Domestic Trade and Consumer Affairs Datuk Shahrir Samad announced today that petrol prices at the pump may most likely increase in August 2008, two months from now. Details on the price hike and fuel subsidy are still sketchy, but here is what we know at the moment.

  • A new subsidy system will be implemented based on need rather than use.
  • The keyword of need rather than use indicates that a person with high income, despite choosing to use a very fuel efficient car will still not qualify for subsidies.
  • What we know is that some will have to pay a higher market price for unsubsidised fuel, but we do not know if the subsidised RM1.92 price will remain or increase.
  • Diesel prices will also go up, and based on previous reports the hike could be higher than the petrol price hike.
  • The unsubsidised market price fuel sold at the pumps may be sold at cost plus profit which is already high enough, but there is also the possibility for the government to include fuel tax which will drive the price up higher.

If tomorrow’s cabinet meeting goes well, we will be able to know full details on what the new fuel price and subsidy plan is on Wednesday.

These are truly worrying times when even heavily subsidised Brunei is considering reducing subsidies, a move that will increase the price of fuel in Brunei, which currently stands at B$0.53 per litre, or about RM1.22 per litre. But Brunei’s move is more of an energy conversation and environmental issue, as the cheap fuel prices have made most Bruneians wasteful with the usage of the precious commodity.

8:15PM UPDATE: The Prime Minister announced that the new revised fuel subsidy plan will take effect immediately from Wednesday onwards to “avoid any speculation.”

8:20PM UPDATE: Datuk Shahrir Samad was asked by Reuters to comment on the PM’s earlier announcement that the new fuel subsidy structure would take immediate effect. Datuk Shahrir only said that Wednesday’s announcement would be an incremental step towards a total restructure in August and did not elaborate further.