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The RM1.99 price cap on RON95 may offer relief at the pump, but it may no longer be enough to curb the rising cost of living, the Institute of Strategic Analysis and Policy Research (INSAP) has warned
According to the New Straits Times, INSAP director Woon King Chai said that while the subsidy has cushioned consumers from the economic pressures of the US-Iran war, it has not addressed broader inflationary pressures.
He added that Malaysia is facing a severe supply shock, particularly with diesel prices having surged by more than 100% in recent periods.
INSAP projects headline inflation to reach between 6.1 and 6.6 per cent this year, as tensions in the Middle East continue to heighten economic uncertainty
Woon said diesel, as a critical input for businesses, means higher transportation and logistics costs would eventually be passed on to consumers.
He added that the impact is particularly regressive for lower-income groups, who have limited financial buffers to absorb the shock. B40 households are expected to lose about RM165 in monthly income, or roughly 4.8 per cent of total earnings.
Lower M40 households are also feeling the squeeze, with projected losses ranging from RM242 to RM355.
Woon also pointed out that Malaysia is caught in a structural subsidy dilemma, where every RM1 gained in oil revenue requires significantly higher spending to sustain fuel subsidies
He noted that additional revenue from higher oil prices only covers about 26% of total subsidy costs.
INSAP called for greater transparency in fuel pricing and structural reforms, including the possible reintroduction of the Goods and Services Tax (GST), may be necessary.
