From Business Times – Extra oil subsidy cost not a problem

April 8, 2011

Dateline 2011-03-24:

MALAYSIA should not have any problem funding the extra subsidy cost due to higher oil prices but it could become a challenge if prices stayed too high for too long.

This would mean prices of about US$150 (RM454.5) a barrel, said Standard Chartered (StanChart) Bank economist Alvin Liew.

The government has pledged to absorb the extra subsidy from higher oil prices, although the subsidy bill could jump to more than RM14 billion if prices continue to rise.

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Cheaper RON95 petrol by Mid-Year

January 9, 2009

Taken from the New Straits Times, Malaysia, dateline 2008-01-09

KUALA LUMPUR: RON95 petrol will be introduced by the middle of this year to provide a cheaper fuel option for the masses.
At the same time, a higher tax will be levied on RON97 to subsidise RON95.

This was revealed by Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad. A chart on how the retail price of petrol is determined will be provided to the public next week.

The chart will help answer queries and explain how the pricing mechanism works.

RON95, although of a higher grade than RON92, will be priced at the same level as RON92.
Shahrir explained that RON95 was a basic grade of petrol which could be used by virtually all vehicles with the exception of some luxury cars.

“We will introduce RON95 by June or July. RON95 is about 10 sen to 11 sen cheaper than RON97. RON92 is currently priced at RM1.70. We will price RON95 at about the same,” he said after launching the Tesco-RHB Credit Card and Tesco-RHB Debit cards in Tesco Ampang yesterday.

Shahrir said the pricing of RON95 would be based on the Automatic Pricing Mechanism (APM). Prior to this, there was no price crisis and there was no need to explain on how the mechanism worked, he said.

The pricing of petrol at kiosks is based on the Mean of Platts Singapore (MOPS), a regional fuel price monitor.

“Should the MOPS price go below US$40 (RM142) a barrel then retail fuel price will fall. If MOPS is above US$78 per barrel, retail fuel price will increase,” he said.

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Malaysia – An engineer’s take on oil subsidies

March 13, 2008

Since oil subsidies have been a staple ingredient in the media, I thought I would list down some items of discussion with respect to either maintaining or dismantling the current subsidy structure:

  • Subsidies stifle efficiency: With low consumer energy prices, industry might not be willing to develop more efficient technologies that increase efficiency, as there is no financial incentive to do so. Examples of such technologies are inverters to smooth out the start-stop power requirement of equipment such as air conditioners, more efficient lighting technology.
  • Subsidies artificially increase commercial efficiency: If the viability of new manufacturing lines or engineering solutions have a energy cost component, then because energy is cheap, the return on investment would be higher than if energy was factored in at global prices.
  • Malaysian pays for neighbours’ gas: ‘Nuff said.

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