Review Targeted Fuel Subsidies as Crude Oil Prices Rise

Bank Muamalat Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid recommended on 26 October 2026 that the Malaysian government review its fuel subsidy mechanism and strengthen targeted assistance if global crude oil prices continue rising towards USD 150 per barrel (approximately RM 660 per barrel).

The call comes as volatile financial markets and Middle East supply concerns drove oil prices to a nearly six-month high of USD 116 per barrel (approximately RM 510 per barrel) last week, directly threatening national fiscal stability and government expenditure.

Key Facts

Why Are Analysts Urging a Review of Targeted Fuel Subsidies?

Analysts urge a fuel subsidy review because rising global crude oil prices directly increase government subsidy expenditure, threatening national financial stability. Unchecked price increases could trigger simultaneous cost-of-living and fiscal crises unless Malaysia reduces aid to higher-income earners and redirects allocations specifically to vulnerable economic sectors and households.

According to Bank Muamalat Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid, crude oil is actively traded across spot and derivative markets, making it susceptible to sudden sentiment shifts and supply fears following attacks on production regions. He noted that recent strikes by Houthi groups in Saudi Arabia raised significant concerns regarding output disruptions from a primary oil-producing nation.

"Secara idealnya, kerajaan perlu membuat semakan terhadap golongan penerima subsidi bahan api. Peruntukan subsidi bagi golongan berpendapatan tinggi sebaiknya dikurangkan bagi memastikan kedudukan kewangan kerajaan tidak terjejas."

— Dr Mohd Afzanizam Abdul Rashid, Chief Economist, Bank Muamalat Malaysia Bhd

KRA Group Strategy Director Amir Fareed Rahim further stated that the government must prepare a clear fiscal contingency plan to prevent persistent financial strain while shielding the public from sudden global price shocks.

**Analysts caution that unmitigated global crude price surges directly inflate government expenditure, necessitating immediate cuts to fuel subsidies for higher-income groups to protect national finances.**

Who Is This For in Malaysia?

This policy direction directly affects higher-income households and the most vulnerable economic segments in Malaysia. Under the recommended targeted mechanisms, fuel subsidy allocations for high-income groups would be reduced, while financial protection and aid remain strictly concentrated on households and economic sectors experiencing the greatest impact from fuel price increases.

KRA Group Strategy Director Amir Fareed Rahim highlighted that sustainable subsidy policy does not require the government to absorb all rising oil costs indefinitely. Instead, public spending must be managed so every ringgit reaches genuine recipients while curbing subsidy leakages.

"Kerajaan perlu melindungi rakyat daripada kejutan harga, bukan menjangkakan perlindungan harga tanpa had. Subsidi bersasar mesti diperkukuh, ketirisan dikurangkan dan bantuan ditumpukan kepada isi rumah serta sektor ekonomi yang paling terkesan."

— Amir Fareed Rahim, Strategy Director, KRA Group

**Targeted fuel subsidy reforms in Malaysia aim to reduce allocations for high-income earners while concentrating government assistance on vulnerable households and heavily impacted economic sectors.**

Common Questions

Could Brent crude oil prices reach USD 150 per barrel?

Yes, Bank Muamalat Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid stated that the possibility of crude oil reaching USD 150 per barrel cannot be ruled out due to market volatility, derivative trading, and Middle East supply concerns.

Will the Malaysian government absorb all future fuel price hikes?

No, KRA Group Strategy Director Amir Fareed Rahim stated that the government must protect citizens from price shocks without promising unlimited price shielding, ensuring instead that every ringgit reaches vulnerable households while reducing leakages.

Which groups face fuel subsidy reductions under the proposed review?

Bank Muamalat Malaysia Bhd stated that subsidy allocations for higher-income groups should ideally be reduced, allowing the government to protect its fiscal standing and focus assistance on the households and economic sectors most affected by rising fuel costs.

Sources and Methodology

This report synthesises domestic reporting published by Careta (originating from Berita Harian) regarding economic analyses from Bank Muamalat Malaysia Bhd and KRA Group on Malaysian fuel subsidies.

Original report: Careta

Source text translated from Malay. Foreign currency figures were converted from United States Dollars (USD) to Ringgit Malaysia (RM) at an approximate current exchange rate of 1 USD = 4.40 RM.

This article is based on the source report above and was last updated on 27 October 2026.