Petrol Subsidies Removal

2016-08-13T17:20:08+08:00By |Government, Spending|

There has been recent sudden announcements of Malaysia’s petrol subsidies removal for RON95 & diesel instead of the expected government implementation of tiered subsidy levels. What are the expected/estimated results of the removal?

petrol-pump

  1. Price of petrol in the very short term to go down as the government currently adjusts prices on a monthly basis using a managed float system. (We have been paying slightly higher then the market rate of petrol)
  2. Short-mid term price of products may be impacted especially if there are major shifts in oil prices
  3. Price of petrol may rise significantly as petrol prices worldwide fluctuate. There may be more BR1M government aid given in those circumstances.
  4. Long-term removal of subsidies viewed as positive by most analysts & the market. However, bigger concerns of corruption & other indiscriminate spending.
  5. Huge savings for the government as fuel subsidies rose as high as RM28.9billion in 2013 (13.7% of operating expenditure)
  6. Bank Negara OPR expect to remain stable at 3.25% & no rates change with the subsidies removal.
  7. Pricing RON95 RM2.30/l & diesel RM2.20/l in Dec 2014.
  8. 2015 RON95 pricing averaging RM2.50/l.
  9. Launch of more electric/hybrid vehicles. Sadly the earlier tax incentive on hybrid/green vehicles had expired.
  10. Consumer spending to be uncertain due to the changes. Expected GDP growth 5% & inflation 3.2%.
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