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THE country’s long-standing subsidised price of RM1.99 per litre for RON95 petrol could come under pressure if geopolitical tensions in the Middle East persist and global crude oil prices remain elevated.
Petroleum Dealers Association of Malaysia president Datuk Khairul Annuar Abdul Aziz told The Star that a prolonged disruption to global energy supply routes, particularly the Strait of Hormuz, could compel the government to review the current subsidised fuel price.
“If the Strait of Hormuz remains closed after the next two months, the government will likely have to readjust the subsidised price.
“It would be completely financially unsustainable otherwise.
“Petroleum dealers’ costs will also increase since we have to buy at that new higher subsidised price,” he said.
Khairul said petroleum dealers are already preparing for potential changes by arranging financing facilities with banks to ensure they have sufficient working capital should wholesale prices rise.
These arrangements, he explained, would provide additional rolling capital to help dealers continue operations in the event they are required to purchase RON95 at a higher subsidised rate.
He also highlighted the pressure from transaction fees linked to electronic payments, noting that many motorists use credit cards when purchasing petrol.
“A lot of people pay for petrol using credit cards and there is a 1% processing fee for that kind of payment, which eats into our margins.
“We are still discussing with Bank Negara Malaysia and the Finance Ministry on possibly reducing the 1% processing fee if the subsidised fuel price increases, but no resolution has been reached,” he said.
Economists have also warned that global crude prices could surge further if geopolitical tensions intensify. Universiti Malaya Social Wellbeing Research Centre director emeritus Prof Datuk Norma Mansor said prices could climb significantly under extreme circumstances.
“Global oil prices could spike toward US$120 per barrel, or even US$150 in extreme scenarios.
“Such extreme levels are usually short-lived because high prices tend to trigger increased production from other countries, which help stabilise prices over time.
“But the government may need to accelerate further subsidy rationalisation or adjust fuel-pricing policies within the next one to two years if the conflict drags on,” she said.
Norma noted that rising oil prices present both opportunities and risks for Malaysia’s economy. As an energy exporter, the country could see increased government revenue through higher contributions from national oil company PETRONAS.
“As an energy exporter, higher oil prices will increase government revenue, and contributions from PETRONAS. That can temporarily improve Malaysia’s trade balance.
“On the negative side, the government will have to absorb a large portion of the cost to maintain domestic subsidised fuel prices, which may limit fiscal space for other priority expenditures like education, healthcare and social protection,” she said.
She added that sustained high energy prices would raise operating costs for businesses, particularly industries heavily dependent on transport and logistics, including manufacturing and agriculture.
Centre for Market Education chief executive officer Carmelo Ferlito said the current spike in prices could ease if geopolitical tensions subside, but risks remain significant while key shipping routes are threatened.
“Currently though, the risk of a much higher range is real as long as [the Straits of] Hormuz remains impaired.
“If crude remains far above earlier assumptions for more than a few weeks or a couple of months, the subsidy burden will become increasingly difficult to defend,” he said.
Ferlito also argued that Malaysia should gradually reduce reliance on fuel subsidies and oil revenue in its fiscal framework.
“Subsidies drain fiscal room that could be used more productively elsewhere.
“We should start thinking about a fiscal system which is less dominated by oil revenues or subsidies, and instead, build on the sustainable pillars of responsible spending and fair taxation,” he said. - March 10, 2026
