‘Prolonged Middle East volatility could pressure subsidies, household expenses’
PETALING JAYA: Malaysians, particularly those from lower-income households, could face higher fuel and food costs in the coming months as geopolitical tensions in the Middle East continue to push global oil prices upwards, experts say.
They say while the government has kept the RON95 price steady at RM1.99 per litre, prolonged volatility could put pressure on subsidies and ripple through daily household expenses, especially with Ramadan and the approaching festive season.
Former parliamentarian Charles Santiago said the government is in a “wait and see” mode.
“The prime minister said a decision will be made, but for now, fuel prices remain unchanged.
“However, the authorities must be proactive to prevent food price spikes that will hit the B40 group the hardest.”
He added that most oil from the Middle East is directed to China and India, which could drive price increases for Malaysia’s imports.
He also said while a stronger ringgit provides some cushion, sustained high oil prices could create inflationary pressures disproportionately affecting lower income households.
Centre for Market Education CEO Dr Carmelo Ferlito said Malaysia’s blanket RON95 and diesel subsidies are inherently distortionary, regardless of whether crude oil prices hover around US$80 or surge towards US$100 per barrel.
“Blanket subsidies weaken price signals, encourage overconsumption and create significant fiscal exposure.”
He called for a gradual transition toward targeted support mechanisms aimed specifically at vulnerable households rather than broad interventions that mask market signals.
He highlighted several economic risks policymakers should monitor.
“Fiscal sustainability is critical. Prolonged high oil prices combined with blanket subsidies could sharply increase contingent liabilities and reduce fiscal space.”
He added that other concerns include policy overreaction – in which expansionary measures intended to curb inflation could inadvertently fuel it – and investment uncertainty from sudden changes in subsidies or price controls.
Ferlito emphasised that predictable, rule-based policies allow businesses and households to manage volatility more effectively.
“Maintaining artificially low fuel prices also delays necessary adjustments in consumption patterns and investment in energy efficiency, weakening Malaysia’s medium-term economic resilience.
“Gradual and clearly communicated transitions towards targeted support are preferable to reactive, crisis-driven reforms.”
Meanwhile, Santiago emphasised the need for government ministries overseeing agriculture and domestic trade to ensure sufficient food supply and stable prices during high-consumption periods.
“Prices at stations such as Shell and Petron are likely to rise. The authorities will have to decide how much of the increase to absorb through subsidies.”
While Malaysia’s direct trade exposure to the Middle East is limited, the indirect effects on fuel and food prices remain significant.
Experts agreed that households may feel short-term pressure from rising costs, but targeted assistance and predictable policies could cushion the impact without creating long-term fiscal or economic distortions.
Both Santiago and Ferlito highlighted the importance of proactive policymaking.
They said authorities need to closely monitor oil markets and adjust support mechanisms as needed to prevent disproportionate burdens on vulnerable groups while maintaining economic stability.
The consensus among experts is clear: Malaysia is insulated from direct disruptions in the Middle East but ripple effects on fuel and food prices demand careful management.
A combination of targeted subsidies, effective price monitoring and transparent communication would be crucial to protecting B40 households and maintaining medium-term economic resilience.
