With the fuel subsidies in effect, rising oil prices are inevitably passed on, which means that the government bears the brunt of the financial pressures.
This appears to be a burden that the Malaysian government plans not to shoulder indefinitely. Due to the sharp rise in global crude oil prices, the current fuel subsidy will be reviewed in favour of a targeted approach for those in need, said finance minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz, The Star reported.
According to the finance minister, the Malaysian government could be paying up to RM28 billion in subsidies for petrol, diesel and liquefied petroleum gas (LPG) for 2022, the ongoing Russian-Ukrainian conflict has pushed crude oil prices past the US$100 (RM418) mark, making it the most expensive it has been since 2014. As of this week, this has passed US$120 (RM502) per barrel.
Under the current programme, the same subsidised prices are enjoyed by everyone, regardless of income, and the high-income groups stand to benefit more from the subsidies based on their higher consumption levels compared to those earning lower incomes, Tengku Zafrul added.
“Therefore, the government will review the fuel subsidy mechanism in order to implement a more targeted and focused aid and subsidy to the vulnerable and those really in need,” the finance minister told the Dewan Rakyat during the Minister’s Question Time segment today, The Star reported.
The finance minister’s statement was in response to a question posed by Wong Hon Wai (PH-Bukit Bendera), asking if there will be a coordination of petrol, diesel and subsidy programmes in light of the sharp increases in global crude oil and natural gas prices.
The finance minister also said that the government cannot borrow for operating expenses such as subsidies, and therefore it must offset the increase in subsidy cost by increasing revenue and savings, the report added. The implementation of targeted subsidies is therefore expected to relieve pressure on the government’s financial resources, and the savings gained can be redistributed for other programmes for the welfare of the people, said Tengku Zafrul.
Although Malaysian consumers currently pay RM2.05 per litre for the RON 95 grade of petrol, the actual cost of the fuel had reached RM3.70 per litre in March, which means that the Malaysian government covered the difference of RM1.65 per litre. For perspective, the unsubsidised RON 97 grade of petrol was priced at RM3.75 per litre this week, through a 30 sen spike.
Tengku Zafrul gave the example of when a consumer refuels with a value of RM100 for about 49 litres of RON 95, the government pays RM81 because the actual market price is RM181 for 49 litres of RON 95 petrol; this means that the government subsidy is up to 45% of the total price, he said.
Meanwhile, consumers of diesel currently pay RM2.15 per litre for the B10 and B20 blends (the B7 blend is 20 sen dearer at RM2.35 per litre), while the actual cost for the fuel has exceeded RM4 per litre, the finance minister added.
In terms of losses, the large gap between the retail price of fuels in Malaysia compared to actual market prices will also lead to a higher risk of subsidy leakage due to fuel smuggling into neighbouring countries, where fuels are sold at higher retail prices, he continued.
For comparison against the prices of fuels sold in neighbouring countries, petrol is sold in Indonesia at RM3.74 per litre, Thailand at RM5.63 per litre and Singapore at RM9.16 per litre, according to Tengku Zafrul; even compared to other oil-producing countries, Malaysia’s current rate of RM2.05 per litre is relatively low compared with Saudi Arabia, which retails petrol at RM2.59 per litre, he said.
The Malaysian government is also in the process of reviewing the targeted subsidy approach for expanding to subsidise other products, in order for the subsidies to reach those who are really in need, the finance minister said.
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when fuel price goes up, food and groceries goes up as well. but when fuel price goes down, these stays up. one thing that don’t really go up is our salary.
Exactly!
What a dim-witted Finance Minister (FM) !
Economics 101 – Fuel prices increase will certainly drive up everyday necessities prices up and when fuel prices fall like a brick they never come down! Everyday necessities price rise becomes permanent – B40 will definitely suffer the most. Throughout history, oil price rise is never permanent, it fact it has even gone negative (minus US$20.00) recently.
Today’s skyrocketing world oil prices is clearly attributable to the war in Ukraine.
Our FM says the fuel subsidy also benefited the rich but how many Malaysians are truly rich?? Our FM should continue the fuel subsidy for the B40s and those M40s falling back to B40. Any pay rise can never keep up with galloping price rises – just think of the spiraling consequences.
When the Ukraine war is over and world oil price falls back to US#30 then what?? The B40s will still be left holding the empty bag!
The key here is to prevent everyday necessities price rise from becoming permanent – the fuel subsidy is huge but the impact on ordinary citizens is equally damaging. But I think the higher fuel subsidy is money well spent in the near term – could be a couple of months.
The world is scrambling in a concerted effort to stop the war right now!! World oil price will come down sooner rather than later.
All past mechanism to re-distribute fuel subsidy has barely helped and failed to stem daily price rises!
Copy paste: “He was never in politics or a member of MPs, he is a professional technocrat brought in as Fin Min. That makes him more credible and neutral than any politician, and he doesnt give 2 hoots about being kicked out of politics as he was never in it! Listen to what he has to say from a financial guy POV.”
Just be happy that you would not have to bear the burden of the national debt created by the gahmen subsidies of ron95 & diesel as that’s the future generation’s job.
Copy paste: “That is why we should be syukuring penyayang gomen meanwhile is still keeping prices low with petrol rakyat RON95 at RM2.05 a liter.”
Why u don’t mention how much government earns when usd140/barrel now?
Price per liter compared were paying more for processed fuels, diesel & petrol, so the argument on earning profit from crude sales is fallacy as we are consuming more petrol with the ever higher car sales yearly. Were effectively a nett importer with our current usage.
Are you saying that lower cruel oil price is good for our country? Say USD50 per barrel, our govt sure can save a lot on subsidy. Right?
See below comments
If follow The Star report shared below, then yes, at higher prices we stand to lose more money
Copy paste: “As The Star reports, rising oil prices are generally positive for a net oil and gas exporting country like Malaysia. According to a CGS-CIMB Research report, it is estimated that for every US$1 (RM4.18) per barrel average increase in oil prices, the government stands to add some RM370 million in revenue.
However, given that the country has a fuel subsidy mechanism in place, that same US$1 per barrel increase will set the government back by around RM780 million in fuel subsidies, based on the price of RON 95 and diesel remaining unchanged at their ceiling price of RM2.05 per litre and RM2.15 per litre respectively.”
https://paultan.org/2022/03/09/rising-oil-prices-fuel-subsidy-costs-malaysia-more-than-it-profits-each-us1-increase-is-a-rm410m-deficit/
We only earn the margin between selling our higher grade oil and buying Saudi oil for our consumption. If crude oil goes up, both rises the same percentage so basically we do not benefit from rising oil prices as selling and buying prices goes up in tandem. Only way we can truly benefit is by reducing consumption. Basically we need more people staying at home or WFH.
Excuses one after another. Money wasting projects like tun razak exchange tower wasn’t a waste of money?
Isn’t that by a previous Government? Why put responsibility for actions which are not from them?
All natural resources of the country belongs to the rakyat and by right Govt should be updating where is this oil revenue going to. Results and common sense will tell it wasted for decades by politicians.its a shame our currency has dropped so badly despite these rich resources compared to our south neighbours .At least keep the subsidies going for the majority poor in this country.
To be fair to all rakyat, oil revenue 30% should go to Kelantan, 30% go to Terengganu, and 30% go to Sarawak. People from other states should pay full price and live with 10% saja. Mau?
Sabah produce close to 60% of the whole national output, so. how much % do you think they deserve?
Sabah has shit. It is Sarawak that produces the bulk of oil in East Malaysia.
He will be kicked out of politics and as a Minister, if he goes ahead and does it. People will remember it
He was never in politics or a member of MPs, he is a professional technocrat brought in as Fin Min. That makes him more credible and neutral than any politician, and he doesnt give 2 hoots about being kicked out of politics as he was never in it! Listen to what he has to say from a financial guy POV.
So i pay like 50k tax per year. But the gov now say they dont appreciate that at all. And because people like me is considered high-income group is not supposed to enjoy the little subsidy that the govt is giving. And i used like 50liter per month. Govt at most is giving me back $100 per month for the 50k tax I contributed. Why always look for ways to punish the T20 group? Always paying the most taxes, never get to enjoy tax breaks like business men, and always getting penalized by the govt.
Yep. Should be Politician stop wasting Gomen’s money on ridiculous projects during PRN/PRu instead. Stop using tax payers money to get glamour. Use that for petrol subsidy, we dont mind that.
Tax the rich so no problemo
@IGP mom .. looks like we have to do petition to LHDN. We never mind gomen want to cut subsidy to us, but during E-filing LHDN, GIVE US PERLEPASAN FOR PETROL EXPENSES! We dont enjoy subsidy, then we shouldnt be burdened by giving tax for petrol.
Only 28b…
Good Job. It’s time to remove old bulk subsidy system.
Then go by limiting consumption by IC, first 100 liters subsidized then the rest pay float rate since he mentioned “high-income groups stand to benefit more from the subsidies based on their higher consumption levels compared to those earning lower incomes”
Yep, this is better. I know lots of scoundrels out there get all the aids despite having big income. Most of them get around it for not having “slip gaji”.
cut ur ministers pay first
The Russian conflict will drag for months or even years.
So those intending to buy big cc and fuel guzzling cars ,better get Axia or Myvi,if high petrol bill is a nightmare.
Copy paste: “Biden pun sama bangang sebab cancel Keystone pipeline dengan fracking. US was net oil exporter bawah Trump. kalau tak cancel dua benda tu, harga minyak tak mungkin tinggi macam skrg.”
Can Petronas do more national service?If our menteri dude still wants to jack up to market rate..be prepared for backlash..Lazada,Grab,transportation companies will up charges accordingly and pass to ultimately the covid stricken rakyat.
His roti chanai will cost Rm4 a piece,teh tarik at Rm4 a glass..tambang bas sekolah will skyrocket.But he got Vellfire,petrol fully taken care,no worry leh.
Copy paste: “Ini maseh semua salah Putin. Syukur petrol rakyat Malaysia RON95 masih murah… #BetterNation #KeluargaMalaysia”
Syu syu syu.. syu yormarder la.. Did we ask for your opinion? Diam2 read the article la..
Copy paste: “World class butthurt from those who did not give cheap petrol when they were around.”
Copy paste: “Alhamdulillah be grateful to be Malaysian compare to other non subsidized countries even though we still admit having some painful in our daily life cost. Alternative is think positive by generating more revenues and practice calculative cost cutting measures during this unavoidable recent war conflict & never ending global & local economic obstacles.”
The “targeted” group will then be able to make a profit from the non-targeted group by sub selling to them..lol
If targeted bantuan like BR1M, then it won’t help the non-targeted group as those in need will get help directly.
Putin…
Hidden due to lowcomment rating. Click here to see.
Terima kasih banyak2. Rakyat Johor, u know what to do this weekend ya. #Syukur
This quote “RM100 for about 49 litres of RON 95, the government pays RM81 because the actual market price is RM181 for 49 litres of RON 95 petrol”
How is that possible when RM181/49L = RM3.70 while the RON97 which is unsubsidized is RM3.75
Cannot agree more… our gov is talking nonsense here…
How can RON97 and RON95 only difference by RM0.05?
Clearly they are trying to fool us….
97-95=2, haha
It is clearly stated. You should read the article in full before you comment.
Copy paste: “Although Malaysian consumers currently pay RM2.05 per litre for the RON 95 grade of petrol, the actual cost of the fuel had reached RM3.70 per litre in March, which means that the Malaysian government covered the difference of RM1.65 per litre.”
T20 pay full price
M40 pay RM3
B40 pay RM2.5
talk is cheap
Menteri no need to pay
When oil prices down, gov is subsidy is up.
When oil prices up, gov subsidy is up.
Suddenly EV looks like a good option now haha
The rakyat are also subsidizing or should I say paying your fat salary, allowance, luxury cars, luxury offices and all the wasteful activities. Can we cut that too?
Agree. Next parliament, should table budget for petrol subsidy along with budget for MP allowances. Really tricky arr them, ask to increase their allowances, never look at gomen pocket how much have. When come to rakyat subsidy, suddenly gomen pocket left dust only.
I support higher petrol price IF government reduces car prices
In UK supermarkets like Tesco are alowed to sell their own brand petrol. And its supercheap. Nothing incredible there though just sufficient to get your car moving from point A to point B. The govt should consider this as an alternative before increasing fuel price to match world brent.
This subsidy of Rm$28 billion for rakyat is nothing compared to the 1MDB Loses, the Tabung Haji loses, the MARA loses, the Felda, loses, the bank bumiputra loses, if only our 1MDB RM$388 Billion is not loss, the interest alone can pay for the Tm$28 billion for the subsidy, can pay for all the PTPTN etc….Johore Bangkit….. ,
Until they give us this promise, they should never be back in power.
World class butthurt from those who did not give cheap petrol when they were around.
Dun blame BN when Putin is waging war in other part of the world. BN din ask him to go to war.
Johore dan woke and realised to syukur banyak2, anda bila lagi nak bangkit?
The rakyat are forced to pay unnecessary minister’s salary, subsidize all manner of shit for them, not to mention pay for chauffeured driven Vellfire cars to ferry these bas3rds around. How much in total are we spending on this Zafrul? If anything look for ways to reduce this first goddamn you, stop squeezing the rakyat.
No such thing as unnecessary, if your boss ask you work for free you want kah? Toking kok. Even private sector top execs gets high salaries plus all manner of shit perks, not to mention chauffeured driven expensive cars. They even get rewarded with yearly huge bonuses which our ministers do not get so syukur sikit they are still below that of private sector high fliers.
It is the B40 who voted for the current g. Now let’s have a taste of your own medicine.
Buy EV. Wait, fuel up, electricity coming up. Maybe after Erection…
Alhamdulillah be grateful to be Malaysian compare to other non subsidized countries even though we still admit having some painful in our daily life cost. Alternative is think positive by generating more revenues and practice calculative cost cutting measures during this unavoidable recent war conflict & never ending global & local economic obstacles.
QFT!
Where do the vehicle taxes go? When I buy new car I have already paid car duties/ taxes upfront to the gomen. This is supposed to be used for the fuel subsidy. Why the need to pay double?.
A country will never go at loss doing trades and business. Know why? You control everything from raw material to end product. You control your cost. Other country war, how does that affect the world crude pricing? Think simpler. Every country internationally rely on one country which is at war to set the price of crude? As for us, how many of you pump 97? Burning at a higher quality is very expensive and silly. Just buy an octane and put it in. Plus, the whole channel for 97 importing, selling high grade crude. This channel helps alot of people rich, playing with pips enough for you to earn a super lifetime. Malaysia is 30mil population, seems to have so much natural resources, everything changes in the world that will burden the population will definitely be included by them. Any changes that benefits the population will not be included. Funny isnt it. Problem all the while is not the economy. Isnt it so? Lets take sugar pricing as a thought. Lets take palm oil pricing as a thought. I think a conventional hawker with very much sensitive towards profit and loss, good operational cost decision making will make a better leader.
Such myopic view, a conventional hawker will only think about his P&L and would have no qualms to raise prices to the detriment of his customers. A responsible Government cannot do that so sensitively when price changes as they have to consider their customers; the rakyat. So all these while oil prices had been going up since end of 2020, we had been cushioned from the rises until recently where the Government can no longer absorb the losses anymore.
Why don’t you cut unnessary cost like pencen? Parlimentarians subsidy and so on.. this is extra to them but petrol is essential to everyone
Government pension are some of the lowest payout with many of those retirees are below the poverty line now and YOU want to cut that further? Are you that selfcentered and selfish to consider only yourself?
Let Lim Guan eng be MOF. Lim Guan Eng can give malaysian Rm1.50 perliter petrol with subsidy just cost RM500million. Hidup Raykat! Hidup Raykat..
Lim Guan Eng math is 10 – 20 = 500.. Hidup Terowong! Hidup Raykat!