Would You Pay RM6 for a Liter of RON95? Malaysia’s Petrol Subsidy Explained

Currently, oil prices are at a five-year high as a result of geopolitical tensions. This has translated into rising fuel prices at the pump around the world.

In case you’re wondering, our neighbors in Thailand are indeed paying roughly RM6 for a liter of RON95 petrol, or 47.36 baht per liter (at the time of writing).

That’s because Thailand is not a major oil producer, and thus petrol prices closely follow market prices. On the other hand, Malaysia is a major oil producing and exporting country. So, it stands to follow that Malaysia’s economy should do better when global oil prices are high, right?

The Fuel Subsidy Explained

Petrol prices at Malaysian pumps are among the lowest in the world, thanks to a generous fuel subsidy scheme.

The government subsidizes RON95 petrol and diesel, while RON97 petrol is unsubsidized. The price of petrol at the pump is calculated using the Automatic Pricing Mechanism (APM), which is a managed float system that, in theory, should change every week as it follows the market price of crude oil.

To give an idea of how much the government is subsidizing our fuel habit, let’s take a look at the table below:

Fuel Price at the pump per liter (RM) Market price per liter (RM est.) Government subsidy per liter (RM est.)
RON95 2.05 3.70 1.65
Diesel 2.15 4.00 1.85
RON97 4.00 4.00 0.00

*Prices as cited by Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz in Parliament on 10 March 2022.

Read More: How to Calculate Petrol Price in Malaysia

Malaysians Lose When Oil Prices are High?

There have been discussions about whether to change or end the fuel subsidy scheme.

Firstly, the fuel subsidy in Malaysia is an untargeted subsidy scheme, meaning that everyone enjoys the subsidy regardless of whether they are rich or poor. Take a look at these two drivers:

  • Lisa drives a Mercedes-Benz C200. Every time she goes to the petrol station, she fills 50 liters of RON95 at RM2.05 per liter. She does this four times a month as she commutes to work and goes to shopping malls. In a month, she pays RM410 at the pump, while the government pays RM330 in subsidy.
  • Jane drives a Perodua Axia. Every time she goes to the petrol station, she fills 20 liters of RON95 at RM2.05 per liter. She does this twice a month as she mainly uses public transport, plus she has a smaller car. In a month, she pays RM82 at the pump, while the government pays RM66 in subsidy.

With this, we can see that those who drive bigger cars enjoy more subsidies than those who drive less. A targeted subsidy was to be implemented on 1 January 2020 to curb this inefficiency, but it was shelved due to the COVID-19 pandemic.

Secondly, the subsidy is costing Malaysia more money every time oil prices rise – money which can be put towards other, beneficial projects. According to a CGS-CIMB research report and The Star, it is estimated that for every US$1 (RM4.18) per barrel average increase in oil prices, it will cost the government around RM780 million in fuel subsidies (based on the price of RON95 petrol and diesel at RM2.05 and RM2.15 per liter respectively).

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz has also said that the subsidy cost in 2022 will add up to RM28 billion if no intervention happens.

Will the Fuel Subsidy End? What Can You Do About It?

It is expected that the current fuel subsidy system in place will not change, at least in the short term – this means we still get to enjoy prices that are lower than the actual market rate. The COVID-19 pandemic has led to much economic suffering, and the government will want to maintain the fuel subsidy to ease the burden on the rakyat.

However, the subsidy is clearly unsustainable in the long run. Indonesia, another major oil producer, bit the bullet and reformed its fuel subsidy program in 2015. It has used the money saved on subsidies to focus on other forms of social protection and infrastructure development.

Furthermore, as the world moves from fossil fuels to renewables, ending fuel subsidies will also encourage people to drive less or use more eco-friendly cars. Low fuel prices are something we can’t enjoy forever, and we could end up paying RM5 or even RM6 for a liter of RON95 petrol in the near future, like our Thai neighbours do now.

Having said that, here are some tips you can do to save fuel and do your part.

Maintain Your Car Regularly

Regular maintenance helps a lot with saving fuel. A well-maintained engine works more efficiently and can get the most power out of a given amount of fuel. On the other hand, a poorly maintained engine will build up sludge and corrosion, making it difficult for the engine to work properly.

Read More: How to Take Care of Your Car & Why You Should

Check Your Tire Pressure

Underinflated tires will have more rolling resistance, leading to increased fuel consumption. A United States Department of Energy study showed that for every 1 pound per square inch (psi) drop in pressure, you can expect your mileage to lower by 0.4 percent. Underinflated tires can also lead to uneven tire wear and even pose a safety risk.

Read More: What You Need to Know About Car Tires

Drive Smoothly

By avoiding sudden acceleration and braking, you can improve your fuel efficiency. Hard movements are inefficient on the engine, not to mention dangerous for other road users. To improve your smoothness on the road, practice defensive driving techniques that may also save your life.

Choose an Energy Efficient Vehicle (EEV)

In Malaysia, EEVs are vehicles that meet a set of specifications for carbon dioxide emissions (gCO2/km) and fuel consumption (L/100km). This standard includes conventional petrol/diesel vehicles, hybrids, as well as electric vehicles.

Currently, many popular models on the road are EEVs, including:

  • A 2020 Perodua Axia sold for RM32,400 on Carsome

    The Perodua Axia is the king of fuel parsimony. With a 1.0-liter engine and a featherweight 860 kilogram body, Perodua claims fuel efficiency of 21.6 kilometers per liter (km/l). It’s a popular choice for city commuters due to its small size and fuel frugality.

  • A 2021 Proton Saga sold for RM37,900 on Carsome

    The nation’s favourite sedan, the Proton Saga is a favored choice for those travelling long distances due to its boot space and stability at highway speeds. Its 1.3-liter engine, paired with a Hyundai-sourced four-speed automatic gearbox achieves a claimed fuel efficiency of 15 km/l.

  • A 2019 Honda HR-V sold for RM97,400 on Carsome

    The Honda HR-V is an example of a sports utility vehicle (SUV) that’s also an EEV. Honda claims a fuel efficiency of 15.1 km/l, helped by features like cruise control, Econ mode, and a sleek aerodynamic design.

Focus & Drive Safe with Carsome

At Carsome, we are committed to leaving the world a better place than we found it – and that includes saving the environment by helping you to save fuel. We carry a large range of EEVs to aid you in your petrol-saving journey. By getting a pre-owned car, you are also helping to save the environment by giving a perfectly good car a new lease of life.

Furthermore, every Carsome Certified car is curated and thoroughly inspected with our stringent 175-point inspection to ensure the car is free from major accidents, as well as frame, fire, or flood damage. It also undergoes a full, professional refurbishment at our Carsome Certified Lab where we condition and maintain the engine for peak efficiency.

Furthermore, every Carsome Certified car includes:

  • Fixed prices without any hidden fees, including road tax, Puspakom inspection fee, ownership transfer fee and loan application fee.
  • A five-day money-back guarantee in case you change your mind.
  • A one-year warranty to ensure further peace of mind.

Drive with peace of mind by visiting carsome.my and choosing your dream ride now.