Government says to review subsidies if oil rises to US$110
(The Malaysian Insider) – KUALA LUMPUR, May 26 — Malaysia will review fuel prices if the price of oil is at US$110-120 per barrel, Deputy Finance Minister Donald Lim said today.
He did not specify the brand of crude but the government had said yesterday it would keep fuel prices unchanged for now, taking into consideration the people’s interests.
Brent crude held steady around US$115 a barrel today due to a softer dollar and as an unexpected drop in US distillate stocks overshadowed gains in gasoline and crude inventories.
US crude for July delivery rose 38 cents to US$101.70 this morning, adding to a US$1.73 gain yesterday.
Investment research firm AmResearch recently estimated Putrajaya is now subsidising at least 90 sen per litre of RON95 versus the intended 30 sen per litre after global crude oil prices surged to US$99 per barrel from US$79 per barrel last year, matching the US$100 per barrel recorded in 2008.
Petrol subsidies will push the government’s fiscal deficit over the projected 5.4 per cent of GDP towards six per cent if RON95 is kept at the current price of RM1.90 per litre for the rest of the year, AmResearch noted.
Deputy Prime Minister Tan Sri Muhyiddin Yassin has said the government expects the subsidy burden to double from RM10.32 billion to RM20.58 billion this year.
Prime Minister Datuk Seri Najib Razak also said fuel subsidies were “like opium” to the Malaysian economy and would have to be gradually slashed as the initial bill of RM11 billion had soared to RM18 billion for the year due to escalating crude oil prices.
The government also announced today that the National Economic Council will decide tomorrow on any revision to the electricity tariff.
Energy, Green Technology and Water Minister Datuk Seri Peter Chin said the Cabinet had directed the council to deliberate the matter and make a decision on a new tariff.
“We know at this juncture, a lot of other things have also increased, including food prices and housing. So the government decided not to increase (fuel prices),” Lim told reporters today after a function here.
