TRUE OR FALSE: Malaysia’s retail pump fuel price is 3rd lowest in the world

FROM my recent conversations, there are some who still feel that our current fuel price is still stiff, more so when the retail pump price is being compared with the selling price of other oil exporting countries like Brunei and Saudi Arabia. This prompted me to relook at the current retail pump price across selected countries around the world.

If one recalls, we have adopted a new retail fuel pump price mechanism. This new retail pump price mechanism is determined by using the managed float system.

Under this system, the retail pump price is decided after taking into consideration the monthly average of global crude oil price. And so, the retail pump price could either increase or decrease or remain unchanged.

The new pricing system differs from the historical setting. In the past, the retail fuel pump price of petrol and diesel is determined by using the automatic price mechanism (APM).

The APM system was introduced in 1983. Under this system, the difference between the retail fuel pump prices and actual retail pump prices was borne by subsidies and sales tax exemptions.

The Government will fix the fuel prices and margins of oil companies as well as dealers at a level who will not be affected by fluctuations in world oil prices.

To answer the question of whether our retail pump price is too high against other oil exporting countries, I used RON95 as the benchmark retail fuel pump price. It was introduced in 2009 into our market to replace RON92.

Using the retail RON95 pump price, I found our selling price is higher than Saudi Arabia and Brunei, selling at US$0.25 per litre and US$0.39 per litre respectively.

In comparison, our selling price is at US$0.42 per litre which is slightly higher than Brunei’s selling price by only US$0.03sen but much higher than Saudi’s selling price by US$0.17sen.

Comparison of the retail RON95 pump price among selected countries in the region is shown in the table above.

Another interesting view that was highlighted is that the savings from fuel prices is not being fully reflected in spending. The argument is that households are still taking the money they are saving at the gas pump and socking it away.

The reason being they are still cautious even when presented with an unexpected windfall.

While such perception does hold water, I found that not all of the windfall from cheaper fuel prices are being saved.

I noticed some of the savings from petrol price is being translated into consumer spending.

I used the credit card transaction as the basis compared to looking at household loans. I discovered higher credit card transaction. In fact, for every 1% change in the retail RON95 pump price, it influences credit card transaction by about 2%.

My take is that consumers are putting their gasoline savings toward discretionary items namely in the areas like travel, home renovations and electronics.

In summary, the retail fuel pump prices for September 2016 is much cheaper for most Malaysian motorists.

With effect from Sept 1, the retail fuel pump price for both RON 95 and RON 97 is cheaper by 5sen compared with the retail pump price in August when the prices remained unchanged.

The new retail pump price for RON 95 is RM1.70 per litre while RON97 is RM2.05. Meanwhile, the pump price for diesel will remain unchanged at RM1.70 per litre and Euro 5 diesel at RM1.80 following a 10sen hike in August. It could mean we can expect some spending on discretionary items.

Anthony Dass is head of AmBank Research, AmBank Group

– ANN

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