Fuel price volatility may spur trader speculation, says economist

 

The government should introduce sequenced fuel subsidy cuts to allow both producers and consumers adequate time to adapt, says economist Niaz Asadullah.

PETALING JAYA: An economist has warned that fuel price volatility may give rise to trader speculation and anticipated inflation which could in turn hamper economic growth.

Niaz Asadullah, Global Labor Organisation’s Southeast Asia lead, said “powerful syndicates” may exploit uncertainties which may destabilise the market further.

“Anticipation of future inflation can also increase as consumers worry that businesses will pass on these higher costs.

“This can affect both consumer spending and producer decision-making, thus impacting economic stability and growth,” he told FMT.

On the other hand, Niaz said the government’s failure to adjust fuel prices promptly may delay essential reforms, potentially jeopardising vital pro-poor programmes and undermining the goals of the Madani framework.

Last Saturday, government spokesman Fahmi Fadzil said the Cabinet had yet to discuss increasing petrol and diesel prices, countering media reports suggesting that a decision had already been made.

Foreign media had reported that Malaysia plans to cut fuel subsidies by June, a move seen as a critical test of the Pakatan Harapan-led unity government’s support, as the country faces high living costs.

Industry and official sources suggested that diesel prices are expected to align with market rates soon after the Kuala Kubu Baharu by-election on May 11, with a phased increase in petrol prices to follow.

Niaz Asadullah.

Niaz called for the government to put in place carefully sequenced subsidy cuts to allow both producers and consumers adequate time to adapt.

“In this context, the government needs to improve the policy-communication process.

“Our leaders should avoid conflicting and premature statements to avoid unnecessary confusion and panic among ordinary citizens and relevant industry stakeholders,” he said.

Meanwhile, Barjoyai Bardai of Malaysia University of Science and Technology said the government’s move to dismiss speculation has eliminated uncertainty about future fuel prices.

Barjoyai Bardai.

“If the government opts to keep the current subsidy policy, there’s no risk of unexpected changes affecting consumers or the market.

“This stability ensures that both the B40 group and all other petrol and diesel users can continue to rely on the financial relief provided by the existing subsidies, without the threat of sudden price increases,” he said. - FMT