Malaysian_Fuel_Prices_Subsidies_November_2014

Yes folks, the time has finally come. Or will come, to be more precise. Subsidies for RON 95 and diesel fuels will end from December 1 onwards, according to the Domestic Trade, Cooperatives and Consumerism (KPDNKK) Minister Datuk Hasan Malek in a report by The Star.

When that happens, the pricing structure for unsubsidised RON 95 and diesel fuels will switch to a floating system that is similar to how RON 97 price is currently managed. Just a few days ago, RON 97 dropped 20 sen to RM2.55 per litre.

Based on the table above (which is displayed at all petrol stations), the prices of RON 95 and diesel, excluding Government subsidies, are RM2.43 and RM2.32 per litre, respectively. But on the other hand, falling crude oil prices – now at a four year low – should lead to lower prices soon.

UPDATE: How will the new unsubsidised prices be calculated?

KPDNKK has released an official statement explaining the new “managed float” pricing structure. Essentially, it will monitor the average fuel prices for the first 19 days of each month to see if it warrants a revision. If there’s a marked change, the average price of the last 10/11 days of the month will dictate the pump prices for the following month.

For example, the average market price of RON 95 from November 1 to 19 is RM2.27, which is lower than the current (subsidised) price of RM2.30. As such, the average market price between November 20 and 30 will then be the pump price for the month of December. This is similar to how RON 97’s market-derived price is managed.

So the question is, will this lead to cheaper fuel for us all in the long run? And once floated, how often will the prices change? This year alone, RON 97 price has been revised six times, ranging from RM2.55 currently to RM2.90 in March. The changes were more frequent at the start of the year (when prices went up) but tapered off more recently (when the prices went down).

What do you think of this news – are we ready for floated fuel prices? And what will happen when crude oil prices inevitably go up again? Tell us in the comments below.