For every US$1 drop in oil price, gov't loses RM300 million - Mustapa

The drop in crude oil prices has resulted in fuel prices dropping to levels not seen since 2004 when petrol prices cost RM1.42 per litre.

But while the rakyat may rejoice, the sharp drop in fuel prices is bleeding the government, to the tune of RM300 million loss for every US$1 drop in oil per barrel prices.

This was the estimate given by de facto Economy Minister Mustapa Mohamad (above) in an interview with Sinar Harian that was published today.

"The fall in global oil prices to below US$25 per barrel (from US$62 per barrel estimated when Budget 2020 was tabled) has a significant impact on national revenue to Petronas dividends declining, and lower petroleum income tax collection," Mustapa said.

RON95 and RON97 prices are currently at RM1.30 per litre and RM1.60 per litre respectively.

Mustapa said the drop in prices was caused by an oversupply in the market, met by low demand.

He said the global economic slowdown due to Covid-19 has also weighed on prices.

He said the government expects oil prices to take a long time to recover and will hover between US$35 and US$45 per barrel for 2020 and 2021.

Besides the drop in fuel prices, the economy has also been hit by decreased activities due to the pandemic forcing the government to impose the movement control order.

Bank Negara has estimated gross domestic product for this year will either be -2 or 0.5 percent.

Mustapa, however, said the government is expecting things to improve by year-end and early next year.

Budget 2021, he said, will be crafted based on the current situation, and that the government is also preparing the 12th Malaysia Plan from 2021 to 2025, for the long term. - Mkini