In the wake of the recent fuel price increase of RON95 and the falling price of crude oil, Malaysia’s research house AmResearch estimates the government subsidy on RON95 petrol will further reduce. Also, the price of RON95 could reach RM2.04 per litre should the global crude oil price fall by another 10%. As for now, the price of crude oil has fallen to a 47-month low to US$84.80 per-barrel, due to global fuel oversupply.
“We estimate that the breakeven of the global crude oil price is at an average of US$84.80 per barrel if RON95 remains at RM2.30 per litre without government subsidy,” said AmResearch. This means as for now, the fuel subsidy by the government could be no longer in place. Price of oil is set to go down further as the International Energy Agency that global demand for oil would be much weaker than previously expected.
AmResearch also mentioned “If global crude oil price falls further, the government fuel subsidy will reduce even without the adjustment in the petrol pump prices.” As for now, the Malaysian government is subsidizing 28 cents per-liter of RON95. Putrajaya is also aiming to float the RON95 petrol price to market rate where at the same time, implementing a target-based petrol subsidy to the low-income group.
However, we can’t help but to think of RON97, as its pricing according to “managed float” based on market prices. The last time the price of the RON97 was changed was in September when a liter of RON97 was dropped by 10 sen to RM2.75 per liter. On that same month the price of crude oil prices was at the average of US$93.03 and US$98.57 per barrel. Based on the latest pricing, logically the price of RON97 should go down as well. Having said that, the extra gained from sales of RON97 could be used by the government to offset the heavy fuel subsidy bill since last year.
Meanwhile, Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Hasan Malek said the government is monitoring the global oil prices before reviewing the retail price for petrol. Only time will tell if we see the prices of petrol reduce in the coming months, but we’ll keep you posted.
[Source: The Star and The Malay Mail]
