Malaysia to cut diesel price nationwide to RM2.10 per liter from July

Malaysia is set to implement a significant reduction in diesel prices nationwide, lowering the cost to RM2.10 (US$0.51) per liter for its citizens beginning in July. This decision follows concerns over smuggling and revenue losses stemming from the disparity between subsidized and unsubsidized diesel prices.

Currently, diesel is sold at a subsidized rate of RM2.15 per liter in the eastern states of Sabah and Sarawak, while it costs RM4.37 per liter in Peninsular Malaysia. Under the new policy, motorists in the peninsula will pay less than half of the current rate. Since June 2024, diesel prices in Peninsular Malaysia have been floated, while East Malaysia retains subsidies due to the necessity of diesel-powered vehicles in its rugged terrain.

The price gap had created opportunities for smuggling subsidized diesel, including across borders, the Ministry of Finance stated. The ministry has not yet detailed how the government will finance the additional subsidy, especially with public finances already strained by rising global fuel costs linked to the conflict in Iran.

Second Finance Minister Amir Hamzah Azizan is expected to provide further details on the new policy. Malaysia is actively seeking alternative fuel sources as the Middle East conflict impacts global supplies. The government's fuel subsidy bill was projected to increase significantly, potentially reaching RM3.2 billion per month, up from RM700 million, due to climbing oil prices.