Public Bank’s investment and trading arm, Public Investment Bank Berhad (PIVB) stated that RON 95 and diesel prices could go up in the coming months if government fuel subsidies and price caps are reviewed.
According to reporting by FMT, PIVB expects that the current subsidised price caps of RM 2.05 for RON 95 and RM 2.15 for Euro 5 B10 diesel to come up for review in H2 2023 and likely rise thereafter.
This follows similar projections made by Maybank Investment Bank (Maybank IB) in September 2022, which warned of sharp price increases, if the current fuel subsidy system is removed, and prices floated according to global crude oil pricing.
Also read: RON 95 and diesel in Malaysia expected to follow global market price in 2023
PIVB says that the current fuel prices of RON 95 could be as high as RM 3.22/litre if it were not for the fuel subsidies.
The current fuel price cap has been in place since February 2021, which was lowered from the previous fuel price cap of RM 2.08 (RON 95) and RM 2.18 (diesel) which was introduced in 2019.
PIVB further stated that gradual adjustments to subsidised prices in the second half of 2023 “could push headline inflation towards the upper limit of official projections of 2.8 percent to 3.8 percent”.
Also read: Govt lowers ceiling price for RON95 and diesel, RM 2.05 and RM 2.15 per litre
Further removing subsidies for the Top 20 (T20) percent of earners via the long touted targeted fuel subsidies mechanism (for the B40 and M40 group) could further inflation by an additional 0.45 percent to 0.75 percent annually. However, in 2022, the T20 income group benefited from 35 percent of fuel subsidies.
In May 2022, then Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz had earlier estimated that fuel subsidies are going to cost as much as RM 28 billion in 2022, a steep increase from RM 11 billion in 2021.
Also read: CAP: Introduce electronic card system for fuel subsidy, targeted aid for B40 and M40 groups
However, after the first 5 months 2022, Datuk Seri Zafrul said that total subsidies were expected to reach RM 30 billion for the whole year (inclusive electricity and LPG), of which more than RM 15 billion will benefit the T20 group instead of the B40 and M40 groups.
Source: Public Investment Bank: Brace, fuel prices to increase after subsidy review in H2 2023