With the government saying it will set the ceiling price of RON95 petrol at RM2.08 and diesel Euro2M at RM2.18 per litre, only the pump price of RON97 petrol (formulated to Euro4M) changes. For the coming week, the petrol grade will cost another 3 sen, taking it to RM2.46 a litre.
According to the Finance Ministry, which is now the one announcing fuel prices each week, the continuing trend of rising prices in oil and petroleum would push all fuel prices up. Using the Automatic Pricing Mechanism (APM) that determines the prices, the ministry said that the price of RON95 should actually be RM2.16 now, while diesel should be at RM2.38.
Using subsidies to offset increases
Thus, the government is offsetting the additional cost by using subsidies to cover the additional 8 sen for RON95 petrol and 20 sen for diesel. However, for those who choose the cleaner, better Euro5 diesel, there is an additional 10 sen per litre to be paid which is a fixed amount.
Obviously subsidies are a drain on the government’s revenues and so this is a short-term exercise. By the middle of the year, when a new system of targeted subsidies can be implemented, the subsidies will no longer be used in such a broad way.