Economist Geoffrey Williams said the widening price gap between RON97 and RON95 following the latest fuel price adjustments could alter consumer behaviour.
PETALING JAYA: A hike in the price of unsubsidised RON95 petrol could push more motorists towards the government’s BUDI95 subsidised scheme, potentially increasing the country’s fuel subsidy bill, an economist has warned.
Economist Geoffrey Williams said the widening price gap between RON97 and RON95 following the latest fuel price adjustments could alter consumer behaviour.
“The hike in RON97 creates a gap of RM1.86, making RON97 almost twice as expensive as RON95.
“This will push consumers to shift to BUDI95 petrol, raising demand for the subsidised fuel and increasing subsidy costs,” he said.
Williams added that the fiscal burden could extend beyond petrol.
“The cost of diesel subsidies will also rise.”
He also questioned whether the higher price of unsubsidised RON95 would generate meaningful revenue.
“Higher unsubsidised RON95 prices affect mainly foreigners, so even a steep 60 sen increase would yield very limited additional revenue.”
Williams said it was also unclear whether higher unsubsidised prices would curb fuel smuggling or illegal sales.
“It is not obvious that raising the unsubsidised price will curb smuggling and illegal sales.
“In fact, it could make subsidised RON95 even more attractive to those seeking cheaper illicit fuel, which would in turn increase enforcement costs.”
He also said that the price adjustment appeared to contradict recent government assurances on the stability of the oil market, saying there was “no clear rationale for it”.
On March 9, Finance Minister II Datuk Seri Amir Hamzah Azizan said although the US-Iran conflict had disrupted oil supplies and pushed crude prices above US$115 per barrel, Malaysia remained relatively insulated as the country’s oil and gas sector continued to perform well.
Two days later, on March 11, Prime Minister Datuk Seri Anwar Ibrahim said Malaysia’s petroleum supply remained secure and sufficient until at least May.
Williams added that global oil prices had already eased after an initial spike linked to tensions in the Middle East.
“Although Brent crude briefly surged to almost US$120 per barrel on Monday, prices have since moderated to the US$90–US$100 range,” he said.
Brent crude prices remain volatile amid continuing uncertainty over the conflict in the region.
