Further reductions required

Malaysia spends US$14 billion subsidising gasoline, diesel and gas each year. Effective 5 June 2008 gasoline prices increased by 40% to RM2.70/litre (US$3.30 a gallon), from RM1.92/litre (US$2.32 a gallon). Diesel prices rose by RM1.00/litre to RM2.58 (US$3.04 per gallon), a 67% increase.

It was announced that price increases were planned to bring fuel prices in line with global market cost, suggesting that it may hit US$3.80 per gallon by August. The Malaysian government has also announced a yearly cash rebate of RM625 per year to Malaysian citizens who own cars with an engine capacity of 3,000 cc or less and RM200 tax rebate to cars with an engine capacity of 3,000 cc and above to offset the increased costs.

The government introduced a temporary ban on buying fuel within 50km of the country border, but the ban was suspended following a price increase on June 7, 2008 for petrol of 41% (to MYR2.70 a litre) and for diesel of 63% (to MYR2.58).

On 22 June 2008 the Malaysian government announced plans to set up separate pumps at its border petrol stations to sell fuel to foreigners at market rates so that only locals can benefit from subsidised petrol. The new pumps will target Singaporeans and Thais who make day trips across the border to fill their tanks with cheaper fuel here. Petrol stations within 50km (31 miles) of the country's northern border with Thailand and southern border with Singapore would be affected.

On 22 August 2008 Malaysia will cut the petrol price by 5.6 percent to 2.55 ringgit (0.76 dollars) a litre due to a drop in global oil prices. The diesel price will also fall by 3.1 percent to 2.50 ringgit a litre with effect on the same day.

The government's announcement comes just three days ahead of a crucial by-election contested by opposition figurehead Anwar Ibrahim in the northern Penang state. Anwar, who is bidding to return to parliament after a decade-long absence, has promised to cut fuel prices substantially if he wins the poll and later wrest power from the ruling coalition.

Recently, the fuel price has dropped until MYR 2.45 and it has dropped for the second time. A further reduction was made on November 1, 2008. RON97 petrol was reduced from RM2.30 a litre to RM2.15 a litre, RON92 petrol from RM2.20 a litre to RM2.05 a litre and diesel from RM2.20 a litre to RM2.05 a litre. The Government revealed that it had ceased subsidizing petrol as of 1 November 2008 when the price of oil dipped below US$65 per barrel. However subsidies were still being paid for diesel and natural gas.

On 18 November, 2008 the Malaysian government made further reductions in the price of gasoline cut pump prices by seven per cent to RM2.00 ringgit per litre and diesel by 15 sen to RM1.90 per litre. The government said that at current prices they were making about 30 sen per litre in sales. Then again on December 3, petrol prices were reduce further. Gasoline prices were reduced 10 sen to RM 1.90 per litre and as for diesel, they were reduced 10 sen to RM 1.80 per litre.