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Monday, January 31, 2011

Egypt’s troubles may push up RON97 prices

The government is left with little choice but to adhere to the dictates of market forces if crude oil prices continue to soar, say petrol dealers

PETALING JAYA: The political unrest and the chaos that is sweeping through Egypt could mean higher RON97 prices for Malaysian drivers.

“There is a formula by the government to keep RON97 in check while it still follows the world market price of crude oil,” said Petrol Dealers Association of Malaysia (PDAM) president Hashim Othman.

“Of course, looking at the situation now, the supply of oil will be disrupted, so automatically the price of crude oil will go up,” he added.

Although RON97 is a controlled market float, the government still has the final say on a possible increase of its prices. RON97 and RON95 are currently at RM2.40 and RM1.90 a litre respectively.

Nevertheless, Hashim said that if oil prices continued to mount, the government would be left with no alternative but to adhere to the dictates of market forces.

“The way we look at it, the government has no choice if the price has to go up,” he added.

On Friday, crude oil went up by 4.3%, or US$3.70 to US$89.34 per barrel.

A significant oil producer, Egypt currently controls the flow of trade through the Suez Canal. An additional four million oil barrels or 4.5% of global production is shipped through the canal or in an adjacent pipeline daily, according to Bloomberg,

In an attempt to control its people, Egypt turned off access to the Internet and mobile phones. Its stock market was also closed yesterday after several consecutive days of crashing.

Speaking on RON95 prices, Domestic Trade, Co-operative and Consumerism Deputy Minister Tan Lian Hoe told FMT that she did not expect to see an increase.

“Thus far, I don’t think so, because RON95 is still under subsidy. We have not had any view on whether to increase, or maintain the price,” she said today.

Tan added that any change in RON95 prices would have to be discussed by the Cabinet first. - FMT

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