KUALA LUMPUR – The Consumers’ Association of Penang (CAP) has warned that Malaysia’s fuel subsidy system is becoming increasingly unsustainable due to uncertainty in global oil markets.
“In view of the current geopolitical situation in the Gulf region, the Consumers’ Association of Penang (CAP) is urging the government and the public to take a pragmatic approach as it is difficult to determine how long the conflict is going to last and the consequences of it,” CAP president Mohideen Abdul Kader said in a statement today.
CAP highlighted that Malaysia’s broad-based fuel subsidies are costly and prone to misuse, with benefits often skewed towards higher-income groups.
“Malaysia’s broad fuel subsidies are expensive and inefficient as they potentially benefit higher-income groups and leak to smugglers who capitalise on the global oil shortage and the huge price difference from Malaysia’s neighbours,” he added.
Despite the government maintaining the subsidised RON95 price at RM1.99 per litre under the Budi Madani programme, CAP noted that the actual cost burden remains high due to fluctuating global prices.
“The retail price of RON95 was RM3.27 per litre with the government subsidising RM1.28 for every litre of RON95 when it was sold at the subsidised rate of RM1.99.”
The association also warned that subsidy spending has surged sharply in a short period, raising doubts about long-term sustainability.
“According to reports, the monthly subsidies of RON95 and diesel has risen from RM700 million to RM3.2 billion in the period within a week of the start of the conflict. Subsidies, even with the best intention, cannot be sustained this way,” he stressed.
CAP proposed a shift from fixing the retail price to capping the subsidy amount, allowing for better fiscal management amid volatile oil markets.
“We would propose that Malaysia should fix the subsidy of RON95 and diesel rather than fixing the subsidised price irrespective of the retail price.”
The group also encouraged Malaysians to help manage fuel consumption and curb wastage.
“Taking public transport is most advisable and if driving cannot be avoided, carpooling and careful trip planning can help reduce fuel consumption,” Mohideen said.
Looking ahead, CAP cautioned that prolonged global oil disruptions could have broader economic effects, including inflation, supply chain disruptions, and industrial slowdowns.
“Households can strengthen their financial position by reducing unnecessary expenditure, conserving energy and supporting efforts to improve national food security. While global events are beyond our control, responsible consumption and prudent planning can help cushion the country against the economic shocks that may arise from prolonged geopolitical instability,” he said.
Reports have also indicated that the government is considering reducing the BUDI95 monthly quota from 300 litres to 200 litres. – March 26, 2026