KUALA LUMPUR, March 6- Prime Minister Anwar Ibrahim has assured the nation that the government will maintain the subsidized price of RON95 petrol at RM1.99 per litre, despite a sharp rise in global crude prices following the U.S.-Israeli strikes on Iran.
Speaking on March 1, the Prime Minister, who also serves as Finance Minister, emphasized that the Budi Madani program will continue to shield Malaysians from market volatility. The announcement comes as Brent crude surged to approximately US$78 per barrel following retaliatory attacks from Tehran and a potential blockade of the Strait of Hormuz, a critical global energy artery.
The escalating conflict presents a dual-edged sword for Malaysia’s economy. According to Socio-Economic Research Centre (SERC) executive director Lee Heng Guie, every US$10 increase in the price of oil generates an additional RM2.5 billion to RM3 billion in petroleum related revenue. However, these gains are often offset by the ballooning cost of maintaining retail fuel subsidies, which threatens to undermine recent efforts toward fiscal discipline.
Energy research firm Rystad Energy warned that Brent crude could spike by an additional US$20 per barrel if tensions remain high. Economists suggest that while the government can absorb short-term shocks, a conflict lasting beyond six months could make the current price cap unsustainable.
Financial experts are urging the administration to move toward more precise subsidy structures to manage long term fiscal risks. Economist Carmelo Ferlito recommended replacing broad handouts with targeted vouchers for low-income groups, arguing that without structural reforms, the government risks depleting resources intended for social protection.
Geoffrey Williams, another prominent economist, proposed a tiered pricing model based on monthly consumption to ensure fairness:
- Full Subsidy: First 50 litres.
- Partial Subsidy: Next 25 litres.
- Market Price: Consumption exceeding 100 litres.
The Strait of Hormuz remains the focal point of market anxiety. As a primary conduit for the world’s crude oil and natural gas, even a perceived threat to the waterway triggers panic buying and recalibrated risk premiums. While Malaysia currently utilizes a 300-litre monthly quota for its targeted scheme, analysts warn that modest price adjustments may be inevitable if global benchmarks remain at or above US$90 per barrel for a prolonged period.
