Adjust RON 95 now!
(Kuala Lumpur, 13th) In the environment of the stronger Malaysian Ringgit and the decline in commodity prices, Galaxy Securities believes that the Malaysian government may soon take action to adjust the RON 95 gasoline subsidy policy.
Galaxy Securities economist Nazmi pointed out that with the appreciation of the Ringgit and the decline in international oil prices, the difference between the subsidized gasoline price and the market price has significantly narrowed, providing the government with an opportunity to rationalize the RON 95 gasoline subsidy policy.
"Our calculations show that the difference between the subsidized RON 95 gasoline price and the current market price is the smallest since the end of the COVID-19 pandemic. On September 11th, the market price of RON 95 gasoline was 2.46 ringgit per liter, only 41 cents higher than the subsidized price of 2.05 ringgit."
He added that considering our country's robust economic growth and stable political situation, implementing rationalization measures for gasoline subsidies at this time will have a smaller impact.
At the same time, Nazmi believes that the adjustment of RON 95 subsidies can be done all at once, rather than in phases as previously planned by the government.
"Because the difference in gasoline prices is not significant at the moment, and in the past, when the government adjusted prices, the range varied from 10 cents to 60 cents, so it is feasible to make the adjustment all at once."
Nazmi also stated that after the adjustment of diesel subsidies in June this year, the impact on the market and inflation was limited, which should strengthen the government's determination to adjust RON 95 gasoline.
Galaxy Securities economist Nazmi pointed out that with the appreciation of the Ringgit and the decline in international oil prices, the difference between the subsidized gasoline price and the market price has significantly narrowed, providing the government with an opportunity to rationalize the RON 95 gasoline subsidy policy.
"Our calculations show that the difference between the subsidized RON 95 gasoline price and the current market price is the smallest since the end of the COVID-19 pandemic. On September 11th, the market price of RON 95 gasoline was 2.46 ringgit per liter, only 41 cents higher than the subsidized price of 2.05 ringgit."
He added that considering our country's robust economic growth and stable political situation, implementing rationalization measures for gasoline subsidies at this time will have a smaller impact.
At the same time, Nazmi believes that the adjustment of RON 95 subsidies can be done all at once, rather than in phases as previously planned by the government.
"Because the difference in gasoline prices is not significant at the moment, and in the past, when the government adjusted prices, the range varied from 10 cents to 60 cents, so it is feasible to make the adjustment all at once."
Nazmi also stated that after the adjustment of diesel subsidies in June this year, the impact on the market and inflation was limited, which should strengthen the government's determination to adjust RON 95 gasoline.
The earlier the adjustment, the better.
Although rationalizing gasoline subsidies would be detrimental to inflation, Nazmi believes that the government should act sooner rather than later.
We believe that now is the best time to reform gasoline subsidies. Gasoline subsidies are a major obstacle to Malaysia's green agenda, so the sooner the subsidies are rationalized, the better.
He estimates that the main consideration for the government not taking action yet is whether the trend of low international oil prices and a strong Ringgit can continue.
Currently, the market has a pessimistic outlook on Brent crude oil. However, the factors leading to the decline in oil prices also weaken global economic sentiment, which may affect Malaysia's economic prospects and cause the government to resist implementing any policies that would increase inflation.
We believe that now is the best time to reform gasoline subsidies. Gasoline subsidies are a major obstacle to Malaysia's green agenda, so the sooner the subsidies are rationalized, the better.
He estimates that the main consideration for the government not taking action yet is whether the trend of low international oil prices and a strong Ringgit can continue.
Currently, the market has a pessimistic outlook on Brent crude oil. However, the factors leading to the decline in oil prices also weaken global economic sentiment, which may affect Malaysia's economic prospects and cause the government to resist implementing any policies that would increase inflation.
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