The government is assessing the risk of cost-push inflation from rising oil prices due to the Middle East conflict, with the government stating it has no plans for drastic policy changes on RON95 subsidies.
PETALING JAYA: The government is assessing the risk of cost-push inflation amid rising oil and fuel prices caused by the ongoing Middle East conflict, said Economy Deputy Minister Datuk Mohd Shahar Abdullah.
He added that tensions in the region, particularly given the fact that Iran is a major oil producer, could push energy costs higher and raise global trade expenses.
“Conflicts in the Middle East can increase fuel prices. Since imports and exports rely heavily on logistics, higher fuel costs may lead to overall price increases, or what we call cost-push inflation.
“The government is monitoring the situation and verifying information from multiple sources to gauge whether the impact could widen,” Mohd Shahar said in the Dewan Negara yesterday.
He was replying to Senator Tiew Way Keng, who asked about Malaysia’s dependence on Middle Eastern markets and potential domestic economic effects.
Mohd Shahar said the country’s inflation remains under control, adding that the government continues to prioritise the wellbeing of the people.
Earlier, Economy Minister Akmal Nasrullah Mohd Nasir said the government does not plan to make drastic changes to current policies, particularly regarding the subsidised price of RON95, despite global oil markets facing uncertainty due to international conflicts.
He said conflicts often trigger sudden surges in Brent crude oil prices but the government, through relevant ministries, continuously monitors key indicators such as petroleum and gas prices to maintain domestic market stability.
“The current targeted subsidy mechanism allows the government to maintain fuel prices at reasonable levels for the people even amid global crude price fluctuations.
“The Finance Ministry continues to review subsidy allocations and fiscal implications to ensure national financial stability.
“Historically, when crude prices exceed certain levels, revenue for national oil companies like Petronas rises. At the same time, government subsidy burdens could also increase,” said Akmal.
He stressed that Prime Minister Datuk Seri Anwar Ibrahim is committed to ensuring that any domestic policy decision is made cautiously and based on data.
“Current market developments do not indicate that the government will make any drastic policy changes, including the pricing of RON95 petrol.
“Any impact from the ongoing conflict will continue to be monitored before any decision is made.”
