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Why is Malaysian gasoline so cheap, less than 11,000 VND/liter?

Why is Malaysian gasoline so cheap, less than 11,000 VND/liter?  - Photo 1.

A petrol station in the capital Kuala Lumpur, Malaysia – Photo: REUTERS

According to the website’s statistics GlobalPetrolPrices.comFrom February 21 to May 30, the average price of petrol in Malaysia was 0.47 USD/liter, or less than 11,000 VND/liter. is a website that tracks retail prices of petrol, electricity and liquefied petroleum gas (LPG) in more than 150 countries.

In general, this site says there is a big difference in prices between countries. Large countries often have higher gasoline prices, while poor countries and petroleum producing and exporting countries have significantly lower prices. This is because countries often apply different taxes and subsidies on gasoline.

According to CNBC, Indonesia and Malaysia directly subsidize petroleum products with higher octane and quality, or RON 95 gasoline.

The Malaysian Government’s subsidy budget for fuel, LPG and oil in 2021 is estimated at about US$1.95 billion. This subsidy block helps to maintain the price of RON 35 gasoline at about 10,800 VND/liter, diesel about 11,400 VND/liter and LPG about 10,000 VND/kg.

The total budget of the Malaysian Government in 2021 is about 70 billion USD. Thus, the subsidy budget accounts for about 2.6% of total government spending.

According to the newspaper The Stars, The Malaysian government may have to spend nearly $6.4 billion in fuel subsidies this year if crude oil prices stay above $100 a barrel.

While the government may receive a larger share of oil revenue, this year’s fuel subsidy bill could be five times higher than the $1.25 billion allocated, according to a report by research firm KAF Research. in the 2022 budget.

In addition, another reason for Malaysia’s lower fuel prices compared to many other countries is the APM (Automatic Pricing Mechanism) pricing policy.

In Malaysia, retail prices of gasoline, diesel and LPG are regulated through the APM pricing mechanism, which was established in 1983.

The APM policy helps to stabilize prices through the application of different tax rates and subsidies. Therefore, the retail price of fuel in Malaysia changes only when the difference exceeds the threshold of tax and regulatory subsidies.

In early April, officials in Malaysia pledged to be tougher in preventing fuel retailers from selling subsidized gasoline to vehicles registered abroad.

The problem arose after thousands of vehicles traveled from Singapore to Malaysia to refuel because of the price difference. These two countries have opened borders with each other since early April, ending 2 years of closure due to the COVID-19 pandemic.

According to Bloomberg News, Malaysian authorities have imposed a fine of about $ 474,000 for fuel retailers caught selling gasoline to foreign-registered cars.

Malaysia previously banned the sale of RON 95 gasoline to unregistered cars in the country, because this is a subsidized gasoline for the people. Singapore is now selling that gasoline for more than four times the Malaysian price.

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