Despite the constant murmurs about adjustments to the BUDI Madani RON95 (BUDI95) subsidy mechanisms, it seems that such a move will not be happening soon. Speaking on the Keluar Sekejap podcast, Prime Minister’s Office senior economic and finance adviser Nurhisham Hussein said that any changes to the RON95 petrol subsidy quotas will only be used as a last resort for the government, due to its direct impact on household spending.
In the podcast, hosted former health minister Khairy Jamaluddin and former Umno information chief Shahril Hamdan, Nurhisham said the government currently has several policy options available to ensure a stable energy supply, but is proceeding cautiously given the sensitivity surrounding fuel prices and broader cost-of-living pressures.
Among those options is to increase subsidised fuel price from RM1.99 per litre to RM2.05 or RM2.10, or further reducing the monthly quota, although he clarified that the latter will be a “last resort”.
The government has recently temporarily reduced the BUDI95 fuel subsidy quota down from 300 litres to now 200 litres of RON95 as a result of the ongoing conflict in the Middle East, although Nurhisham said that “about 90% of consumers using fuel in Malaysia are not affected” by the change.
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“Petrol is a very sensitive issue, and it has a direct impact on the rakyat’s pockets. Even if there is a petrol subsidy adjustment, it will be pushed back later,” he said on the podcast. That being said, nothing is guaranteed yet, as while fuel prices have eased recently, the outlook for the global oil market still remain uncertain, especially for the third quarter of the year.
Nurhisham explained that the easing of the markets recently was due to China reducing their imports, coupled with increased outputs from major oil-producing countries. “But at some point you cannot rely on reserves forever. China will start importing again and countries will also need to rebuild strategic reserves,” he said.
Peace talks between the US and Iran have also reportedly stalled, despite the current (fragile) ceasefire.
Nurhisham further warned that analysts were already expecting July and August to become “very uncomfortable” periods for the oil market, due to renewed demand and lingering supply shortages. “At this point, the market is too optimistic,” he added, stating that there was “no guarantee” fuel prices would remain stable between July and September.
For Malaysians, things could get worse too as fuel usage trends have been pointing upwards, despite the rationalisation efforts and flexible work-from-home arrangements in the public sector. “We are still trying to figure out why. People may save during the work week but travel more during weekends or long holidays,” he said.
Some existing measures had also yet to significantly reduce overall fuel consumption, despite quota reductions and subsidy rationalisation initiatives, he added. Nevertheless, the government is still continuing its efforts to tighten the Subsidised Diesel Control System (SKDS), particularly for the logistics sector, as the government had previously allocated excessive diesel subsidies under the programme, said Nurhisham.
“We gave too much when we started SKDS. Now we are tightening it to create savings because we now have enough data to understand better,” he said on the podcast.
