Extra oil revenue not enough to offset subsidy costs, says Tengku Zafrul

 The prime minister's senior political adviser says the government’s fuel subsidy commitments are significantly higher than Petronas's additional oil-derived income.

Tengku Zafrul Aziz said fuel subsidies are currently estimated at about RM48 billion annually, whereas the increase in oil revenue is only around RM10 billion to RM14 billion.

PETALING JAYA:

 The additional revenue Petronas gains from higher global oil prices is not enough to cover the rising cost of fuel subsidies, says Tengku Zafrul Aziz.

The senior political adviser to Prime Minister Anwar Ibrahim explained that while national oil company Petronas is generating strong earnings due to higher oil prices amid the conflict in the Middle East, its profits cannot simply be used to fund government subsidies.

“Fuel subsidies are currently estimated at about RM4 billion per month, or roughly RM48 billion annually,” he said in a video on Facebook today.

“Meanwhile, the increase in oil revenue is only around RM10 billion to RM14 billion, which is clearly insufficient to cover the cost of subsidies.”

The former investment, trade and industry minister also warned against over-reliance on Petronas as a limitless source of funds. He said excessive withdrawals could undermine the company’s ability to reinvest in its operations and sustain future output.

“The issue is not whether Petronas is profitable or not. The issue is how we manage the nation’s wealth so that it is enough for today, and still available for tomorrow,” he said.

“If all of its profits are spent, investments will slow, production may decline, and future revenues will be affected. That is not saving – that’s eating into the future.”

He noted that Petronas recorded revenue of about US$266 billion and profits of US$45.4 billion in 2025, and added that the finance ministry last year projected Petronas would contribute RM20 billion in dividends to the government in 2026.

He also said that since its establishment in 1974, Petronas has contributed RM1.5 trillion in dividends, state sales tax, cash payments, export duties, and payments to the national trust fund.

Earlier today, former minister Idris Jala noted that higher global oil prices would boost Petronas’s revenue and potentially allow for larger government dividends.

However, he warned that any gains made by Petronas would be outweighed by ballooning fuel subsidies, stating that Putrajaya’s policy of keeping pump prices low through subsidies is eroding the net benefit of rising oil prices.

In a US$120-per-barrel scenario, Idris warned that annual subsidies could rise to RM60 billion to RM70 billion. In comparison, he estimated the extra oil revenue at US$18 billion to US$22 billion.

At US$150 a barrel, he said, annual subsidies could rise to RM84 billion to RM108 billion, while extra oil revenue would only stand at RM28 billion to RM35 billion.

Iran has almost entirely blocked traffic in the Strait of Hormuz in response to strikes by the US and Israel, sending global oil prices skyrocketing.

A US-Iran ceasefire on Tuesday raised expectations of resumed flows at the vital waterway through which 20% of world oil and gas regularly flows, with crude prices plunging by over 15% to dip below US$100 a barrel. - FMT