Oil: Prices, Products and the Future

 

From 12 March to 18 March, RON97 and unsubsidised RON95 petrol prices rose by 60 sen per litre, while diesel prices in Peninsular Malaysia rose by 80 sen per litre. Although subsidised RON95 remains capped at RM1.99 per litre, the government's bill for the BUDI95 subsidy will climb. If the ongoing Middle East conflict drags on, the cost could run into billions of ringgit.

 

Image via FMT

 Even though Malaysia exports more oil and gas products than it imports overall, global oil prices can still influence domestic fuel prices because the country is a net importer of refined petroleum products, which are the fuels used in vehicles. Every USD10 per barrel increase in global prices raises the annual fuel subsidy bill by more than RM10 billion, creating substantial fiscal pressure. Higher oil prices boost petroleum-related government revenue, the net effect could be marginally negative, forcing the government to either absorb the cost or adjust retail prices upward. We are better placed than many other nations and we need to be astute in our subsidies to the Rakyat.

Image via Dialog Group (Facebook)

The data from DOSM separates Malaysia's oil and gas trade into three main categories: 

·                  Crude petroleum and condensate

·                  Refined petroleum products

·                  Liquefied natural gas (LNG)

Crude petroleum and condensates are raw hydrocarbons extracted from underground before any processing takes place.

These raw materials are then sent to refineries, where they are turned into finished fuels. Those finished fuels fall under refined petroleum products, which include everyday fuels such as:

·                  RON95 petrol

·                  RON97 petrol

·                  Diesel

Meanwhile, LNG comes from natural gas, which is cooled to extremely low temperatures until it becomes liquid.

Because Malaysia produces high-grade crude oil, countries with refineries that can process light crude efficiently — such as Japan, South Korea, and Australia — are natural buyers. Their refineries can convert Malaysian crude into higher yields of valuable products such as gasoline and jet fuel. Neighbouring countries like Thailand and Singapore are also frequent buyers due to shorter shipping distances and well-established logistics networks, said Yeah. 

So, the impact on our trade balance for petroleum is less pronounced than a country wholly dependent on imports like India, China or Thailand. We are blessed with sweet crude and net effect could even be positive if we produce/extract more fossil fuels to balance-out any imports of crude oil. 

The other option for the Government is to accelerate use of electric vehicles, more solar for residential houses, renewables in the overall generation mix. We need to be intentional even if conditions improve (i.e. crude oil prices drop). To do so, the Government has to draw-up a short-term (6-12 months) plan to reduce use of fossil fuels for transport, industry or homes. We have a longer-term plan to 2050, but that is too far forward to have an impact today. Incentives removed may need to be reintroduced and more aggressive efforts made to wean away from fossil fuel. 

Reference:

Explained: Why does Malaysia import oil & gas despite producing its own? Says.com, 12 March 2026