Malaysia may be relatively cushioned from the latest oil price spike due to its energy export revenues, but economists warn that sustained crude prices above US$100 (RM473.18) per barrel could complicate subsidy management, weaken the ringgit and raise cost pressures for businesses.
Brent crude surged as high as US$118.93 a barrel on Monday, indicating the biggest-ever absolute price jump in a single day, amid escalating conflict in the Middle East and disruptions to shipping through the Strait of Hormuz, a chokepoint that handles about one-fifth of global oil supply. Experts at UOB Global Economics and Markets Research in a March 6 note had put chances of Brent crude topping US$100 a barrel at 15%.
The surge pushed crude prices past US$100 per barrel for the first time since Russia’s 2022 invasion of Ukraine. At 8.41pm on Monday, Brent crude was trading at US$103.48 per barrel.
The spike rattled global financial markets and triggered broad selling across regional equities as investors reassessed the potential inflationary impact of higher energy prices.
In Malaysia, the benchmark FBM KLCI dropped as much as 54 points, or more than 3%, to 1,664.07 before trimming losses to close at 1,674.17, still down 43.89 points or 2.55%
Mixed impact for Malaysia
Higher oil prices typically present a mixed impact for Malaysia, which exports crude oil and liquefied natural gas (LNG) but also subsidises domestic fuel prices.
“It’s a two-way dynamic. On one hand, higher oil prices mean the government has to spend more on RON95 subsidies. On the other hand, Malaysia is a net exporter of oil, so it also stands to benefit from higher petroleum revenues, says Mohd Redza Abdul Rahman, director of research at BIMB Securities Sdn Bhd.
Prime Minister Datuk Seri Anwar Ibrahim on Monday said the government would maintain the subsidised price of RON95 petrol at RM1.99 per litre despite the spike in global oil prices.
However, Redza noted that rising refining costs and widening product spreads could create margin pressure across downstream industries even as upstream oil producers benefit from higher crude prices.
He said the recent surge in petroleum product prices has significantly outpaced the increase in crude oil, pushing refining margins — or crack spreads — to record highs.
Source: Theedgemalaysia