By TNS News Team
KUALA LUMPUR, 12 March 2026 — The government’s decision to sharply increase retail fuel prices has raised concerns over policy clarity and communication, with economist Prof. Geoffrey Williams describing the move as “surprising” given recent official assurances that Malaysia remained insulated from global oil shocks.
On Wednesday, the government announced that RON97 petrol will increase by 60 sen, while diesel prices in Peninsular Malaysia will rise by 80 sen. The price of unsubsidised RON95 will also increase by 60 sen, with the new rates effective until 18 March.
The announcement comes against the backdrop of volatile global oil markets triggered by the ongoing US–Iran conflict, which earlier pushed Brent crude close to US$120 per barrel earlier this week.
Malaysia’s latest fuel price adjustments take effect from 12–18 March 2026 following volatility in global oil markets amid Middle East tensions.
However, Williams said the policy shift appears inconsistent with statements made by government leaders just days earlier.
“This is a surprising move by the government because only on Monday Finance Minister II Datuk Seri Amir Hamzah Azizan said that while the US–Iran war had disrupted oil supply and pushed crude prices above US$115 per barrel, Malaysia remained relatively insulated because its oil and gas sector continued to perform well,” he told TNS News.
According to Williams, Prime Minister Datuk Seri Anwar Ibrahim had also reassured the public that Malaysia’s oil supplies remain secure until May, suggesting that domestic fuel availability was not under immediate pressure.
Oil Prices Already Moderating
Williams pointed out that global oil prices have already eased from their recent highs.
“Although there was a spike to almost US$120 per barrel for Brent crude on Monday, prices have moderated significantly since then to the US$80–US$90 range,” he said.
He added that Washington’s indication that its military objectives in the Middle East are nearly completed has also reduced fears of a prolonged supply disruption.
Subsidy Dynamics Could Shift
The economist warned that the price adjustments could create unintended consequences in Malaysia’s fuel subsidy system.
He noted that the 60 sen increase in unsubsidised RON95 mainly affects foreigners, meaning the fiscal gains from the move could be limited.
“Very little is gained even from a huge 60 sen hike,” he said.
Meanwhile, the rise in RON97 prices could widen the gap between the two petrol grades to about RM1.86, potentially prompting motorists to switch to the subsidised BUDI95 petrol programme.
“This will cause people to shift to BUDI95 petrol, raising sales of that and increasing the cost of subsidies,” Williams explained.
He also cautioned that diesel subsidy costs could increase, as higher retail prices may boost demand for subsidised fuel channels.
Smuggling Risks Remain
Williams further argued that higher unsubsidised prices may not necessarily curb fuel smuggling.
“Higher unsubsidised prices do not automatically reduce illegal sales. In fact, they can make subsidised RON95 more attractive to those seeking cheaper illicit petrol,” he said, adding that enforcement costs could increase as a result.
Communication Gap
Beyond the economic impact, Williams highlighted a potential communication gap between government assurances and policy actions.
“We saw a reassuring narrative on Monday, a surprise policy change two days later, and no clear rationale for it,” he said.
He noted that even Tengku Datuk Seri Zafrul Tengku Abdul Aziz, the Prime Minister’s senior political adviser, had recently stressed that Malaysia’s status as an oil-producing nation allows the government to shield consumers from rising global energy prices.
“Malaysia’s status as an oil producer, along with income from the sector, helps the government protect the public from rising energy prices,” Zafrul said in remarks reported by Bernama earlier this week.
Calls for Clearer Policy Explanation
Williams said the government should provide a clearer explanation of the rationale behind the fuel price adjustments, particularly as global oil prices remain volatile amid geopolitical tensions.
“Without a clear explanation, the sudden shift risks creating confusion about the government’s strategy in managing fuel subsidies and energy costs,” he said.
The latest adjustments come as Malaysia continues to balance fiscal pressures from fuel subsidies with efforts to shield households from rising living costs.