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RON95 price will follow market price as of Dec 1, said Domestic Trade Cooperative and Consumerism Minister Datuk Hasan Malek today. aThe price of RON95 and diesel would be set according to prevailing global market prices during November, Hasan said. The change is due to global crude oil prices being below that charged at Malaysia fuel pumps, he added.
Hasan, in a statement, said that the price of petroleum products in Malaysia were determined by the Automatic Price Mechanism (APM), implemented since 1983.
“Through this mechanism, the government will fix the retail price at a level where it will not be disrupted by any changes in the cost of the product. However, under this managed float system, the average rate of changes in product costs would determine prices for ensuing months. For example, if world oil prices go up, the prices of RON 95 and diesel here will also increase, and vice-versa.”
The current prices of RON95 and diesel are RM2.30 and RM2.20 per litre, respectively.
“The government will follow the world market prices as well as currency exchange rates to fix the prices of these products. The decision to list RON95 and diesel under the managed float mechanism was made after the successful implementation of fixing RON97 under the scheme.”
Hasan added that the move was done after a thorough study and it proved the government’s commitment to fully enjoy the benefits of the fall in crude oil prices. “For example, the average price of RON95 under the APM between Nov 1 and 19 was RM2.27 per litre, which is lower than the current price of RM2.30 per litre. We will monitor the prices between Nov 20-30 and the average prices in that period will determine the prices of both items in December.” In the current trend persists, it is expected that the pump price of RON95 will be lower next month.
Pressure on the government to have RON95 price to be on a managed float, similar to RON97, rose sharply since the premium fuel price was cut on Wednesday by 20 sen per litre to RM2.55. At RM2.30 per litre currently, RON95 price differential to the premium fuel is just 25 sen and it is understood that internal government policy is to have at least 30 sen difference between the two fuels.
Just at the end of October, the government announced that there will not cut petrol fuel subsidies until June next year when its new targeted subsidy mechanism for RON95 fuel is implemented in June 2015. But today, the government decided to scrap the subsidy. The price of RON97 petrol will go down by 20 sen to RM2.55 per litre from Wednesday. In a statement, the Finance Ministry said it had agreed that the retail price of RON97 petrol be reduced by 20 sen to RM2.55 per litre from Nov 19 (Wednesday). The price of RON95 petrol and diesel, which are subsidised by the Government, remains unchanged. On Oct 2, the prices of RON95 petrol and diesel went up by 20 per litre in an effort by the Government to rationalise subsidies. According to AmResearch, the breakeven of the global crude oil price is at an average of US$84.80 per barrel if RON95 were to remain at RM2.30 per litre without the government subsidy.
The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 75.81 per barrel (bbl) on 20.11.2014. Based on the table above, the prices of RON 95 and diesel, excluding Government subsidies, are RM2.43 and RM2.32 per litre, respectively. But on the other hand, falling crude oil prices should lead to lower prices soon. As reported by The Rakyat Post, analysts expect RON95 price to be cut to RM2.10 per litre – reverting to the level before early October this year – while RON97 falls to RM2.40 per litre. The government will discuss the possibility of introducing a sales tax for RON95 petrol if global crude oil prices continued on a downward trend at a Fiscal Policy Committee meeting next Wednesday, said Deputy Finance Minister Datuk Ahmad Maslan in a report by Bernama. The change from Dec 1 also raises the possibility that petrol and diesel may be subject to the 6% Goods and Services Tax (GST) come April 1
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