Get ready for fuel price increase. RON95 next to go up?

NOW that diesel prices have gone up, Malaysians will now have to get ready for a spike in fuel prices.

As difficult as it sounds, Malaysians have to brace themselves against the impending fuel price increase possibly the RON95.

It might seem unfair, but Malaysians must understand the reasons behind the move by the government.

The government simply cannot subsidise fuel anymore

Malaysians must tune in their minds that the subsidy mentality is not sustainable anymore.

Each year the government spends up to RM50 billion a year to subsidise oil prices which is burning a hole in its pocket.

We as Malaysians must be aware of that fact and help alleviate the government's financial burden.

Just a matter of time

The rationalisation of RON95 petrol subsidy is just a matter of time after the implementation of diesel subsidy on June 10 by the government. 

"Even though the fuel subsidies cost the government more than RM50 billion annually, the impacts are totally different.

"The rise in diesel cost is directly related to cargo or goods transport and logistics affecting the rise of costs throughout the whole supply chain of the respective industries until the goods reach the consumers at the end of the chain with higher prices. 

University Kuala Lumpur economic analyst Associate Professor Dr Aimi Zulhazmi Abdul Rashid said on the other hand, the petrol subsidy rationalisation will have a direct impact on the income of the rakyat.

"An increase in RON95 will reduce immediately the purchasing power of the consumers with higher daily and monthly expenditures.

Hence, PADU (Pangkalan Data Utama) is crucial in the implementation of targeted petrol subsidies in order to lessen the rakyat's financial burden as it has direct impact on their income," Aimi told Dagangnews.

Goods prices set to rise

With the impending spike in fuel prices, goods and services prices will naturally be increased in tandem.

Businesses would cite escalating operational costs on top of the recent diesel price restructuring.

Obviously, some unscrupulous traders will also take advantage of the situation to raise the prices of goods and services.

Inflation rate set to spike

Consequently, when fuel prices go up, core inflation rates are also expected to surge across the country, translating into challenging cost of living for the B40 and M40.

Inflation is an increase in the overall price level and the official inflation rate is tracked by calculating changes in a measure called the consumer price index (CPI). 

When inflation rates increase, the higher prices will be reflected on the CPI across the board. 

The CPI measures the cost of purchasing a constant representative 'basket' of goods and services. 

The quantity and quality of goods in the basket are kept constant, so that changes in the cost of the basket are purely due to price changes.

The changes in the cost of this basket represent the rate of inflation.

Inflation steady for now

Based on Bank Negara Malaysia's projection for 2024, the headline and core inflation are forecasted to remain moderate at between 2-3.5 percent.

This broadly reflects stabilising demand and contained cost pressures, coupled with some potential upside that could arise from the implementation of fuel subsidy rationalisation.

Cushioning the impact

The fuel price increase will not dent the earnings of the T20 or "golongan kayangan."

However, the "rakyat marhaen" or the B20 and even the M40 are expected to feel the pinch.

"To cushion the impact, the government needs to execute the financial assistance effectively to the B40 and M40 groups respective of their household income.

Hence PADU (Pangkalan Data Utama) is crucial in distributing the targeted subsidies," said Aimi.

Oil reserves are depleting

Oil reserves all over the world are depleting. It is said that petrol powered vehicles will one day be a thing of the past as more and more electric vehicles fill the roads.

Subsidy mentality must go

Malaysians must slowly dismantle the subsidy mentality out of their minds.

Any type of subsidies be it fuel or sugar distort markets, scare away investors and stifle the competitive spirit.

It is time that governments, companies and Malaysians learn to compete on a level playing field.

Targeted subsidies must continue

However, not all Malaysians are fortunate such as the abject poor, destitute, or the disabled.

Hence the government must continue with the targeted subsidies and lend a helping hand.

Wait for the surprise

So, when exactly will fuel prices be increased. Nobody knows exactly but we will know once the long queues start snaking at petrol stations.

"We surprised everyone with the diesel increase. We will surprise everyone with petrol," said economic minister Rafizi Ramli last month.

Will this petrol increase surprise Malaysians anymore? - DagangNews.com