KUALA LUMPUR: The government’s move to scrap petrol and diesel subsidies and decide on a managed float in determining retail fuel prices based on global crude oil prices will provide the flexibility for consumers to enjoy cheaper fuel given the current oil price slump.
Oil and gas industry analysts believe there is a strong possibility for the price of RON95 to be lower than its current subsidised retail price of RM2.30 a litre and RM2.20 per litre for diesel, once the new pricing mechanism commences on Dec 1, 2014.
The government will decide the price of petrol and diesel through a managed float, based on the Automated Price Mechanism (APM) and currency rates, similar to the system used to determine the price of RON97 since July 2010.
Under the system, the government would calculate the average price for a particular month and set it as the price for the following month.
According to Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Hasan Malek, the average RON95 price from Nov 1 to 19 under the APM declined to RM2.27 per litre.
This was lower than the retail price of RM2.30 per litre.
If the lower price of RON95 continues until Nov 30, 2014, then the price of petrol would be lower than the pump price of RM2.30.
Another plus point of this mechanism is that the people can be be sure that oil prices will be at a fairly constant level, at least for another few months, as analysts are expecting the weak global oil prices will last for another two years with a mid-term projection of between US$80 and US$90 per barrel. — Bernama