It looks like Malaysian motorists will be starting the new year on a negative note, as fuel prices are expected to go up in January (tomorrow). According to finance ministry strategic communications director Datuk Lokman Noor Adam, this is due to the increase in the price of crude oil, as well as weak ringgit forex against the US dollar.

In a Bernama report, Lokman explained that fuel prices in Malaysia are set according to the average price of fuel in the world market, as it has been since the controlled floatation method was introduced in December 2014. “The average (here) means the prices from day one to 31 (of the month) divided by 31 days. Not the global oil prices at the end of the month as understood by certain quarters,” he said.

With the US dollar going from strength to strength against ringgit, the cost of purchasing crude oil has surged, Lokman added. On the matter of fuel subsidy, he made clear that the previous method of giving bulk subsidies had to be discontinued, because it benefitted the rich more than it did the poor.

The Malaysian government subsidised RM0.6843 for each litre of RON 95 back in July 2014 (before the current float system was introduced), according to Lokman. However, the rich used the fuel in bigger quantities compared to the poor, and hence received larger subsidies.

“For example, the subsidy for the poor people driving (Perodua) Kancil was only around RM16.29 when they filled their tanks to full with RON 95. Whereas those in the middle class bracket driving a Toyota Camry spent RM150 for a full tank. The subsidy that the government has to pay to these group would be RM48.87, a three-fold increase than the poor. Is this fair?” he asked.

Citing a study by the finance ministry, Lokman said that around 70% of the fuel subsidy went to help the rich, while the target groups it was mainly planned for enjoyed far less than intended. The previous bulk subsidy system also benefitted foreigners, despite it being borne by Malaysian taxpayers, he added.

“Subsidy means help, assistance and handout from the government to the people. If (you) ask who should get the assistance, we should certainly help the less fortunate first before the rich. And it should definitely be given to our people, not foreigners,” Lokman concluded.

Fuel prices in Malaysia currently stand at RM1.90 per litre for RON 95, RM2.25 per litre for RON 97, RM1.85 per litre for diesel and RM1.95 per litre for Euro 5 diesel. Stay tuned to later today to find out January 2017 prices.