‘Don't delay RON95 revamp'

The Star

16-06-2025

PETALING JAYA: The government should proceed with the targeted RON95 petrol subsidy rollout despite the recent spike in global oil prices due to escalating tensions in the Middle East, say economists.
Sunway University economics professor Dr Yeah Kim Leng stressed that the surge in crude oil prices makes it even more urgent for the government to implement the plan.
'It will allow the burden of rising oil prices to be shared with consumers and businesses while preventing a ballooning subsidy burden to the nearly RM100bil incurred in 2020 during the Covid-19 pandemic,' he said.
Yeah pointed out that unless absorbed by the government, higher global oil prices would lead to increased pump prices, putting pressure on national finances.
'This would require the government to cut other expenditures or incur a higher fiscal deficit, which will further raise the country's debt level,' he said, suggesting a gradual rollout to enhance the nation's resilience in coping with global uncertainties and oil price shocks.
On Friday, global oil prices surged by over 9% to around US$75 (RM318) per barrel, the highest in nearly five months, following Israel's pre-emptive strike on Iran.
Earlier in April, oil prices had dipped below US$60 (RM254) before climbing to around US$65 (RM275) by mid-month, still lower than December 2024's US$74 (RM314).
Economist Dr Geoffrey Williams echoed the call to proceed with subsidy rationalisation, noting that higher oil prices would widen the gap between market prices and retail pump prices, increasing the government's subsidy burden.
'It's better to rationalise subsidies now if oil prices are expected to remain high for the rest of the year,' he said.
The government stands to save at least RM8bil or more, he added, which could be redirected to critical areas such as healthcare, education and social protection.
Williams also cited the success of earlier rationalisations in diesel and electricity subsidies, which raised RM11.5bil without triggering hostile market or public reactions.
'The government must push through with targeted subsidies now. There is no better time and any delay will signal weakness and damage credibility,' he added.
Associated Chinese Chambers of Commerce and Industry of Malaysia treasurer-general Datuk Koong Lin Loong also supported a phased implementation, warning that any delay could significantly increase the government's subsidy bill if oil prices continue to rise.
'This is to avoid a sudden shock to the nation's economy, which is already grappling with the current geopolitical uncertainties,' he said.
He also called for the Price Control and Anti-Profiteering Unit to be strengthened to prevent businesses from arbitrarily raising prices, which could drive up inflation and supply chain costs.
Meanwhile, Federation of Malaysian Business Associations vice-chairman Nivas Ragavan cautioned that the timing of the rollout is crucial, particularly when global oil prices remain uncertain.
'Volatile oil prices can exacerbate the burden on the rakyat if not carefully managed. A sudden implementation during a price spike could be highly inflationary and politically sensitive,' he said.
He noted the government's earlier decision to delay the e-invoicing initiative to ease the burden on businesses, and suggested a similar approach may be needed for the RON95 subsidy if global oil prices remain unstable.