Report: Diesel Retail Sales Drop By 30% Following Subsidy Rationalisation

According to a recent report by local daily New Straits Times (NST), retail sales of diesel fuels across Malaysia experienced a 30% drop in the first week since said fuel type’s subsidy rationalisation took effect on June 10.

This equates to reduction of up to 8 million litres of diesel a day in contrast to the week prior, detailed Finance Minister II Datuk Seri Amir Hamzah Azizan in a recent Dewan Rakyat session. As for commercial sales, as well as purchases by companies at unsubsidised market rates, instead rose by four million litres in the same time frame, added the minister.

This trend effectively indicates that some companies which should have purchased diesel at market prices had previously bought diesel at subsidised, retail rate, continued Datuk Seri Amir Hamzah when speaking to press. “The upward trend in commercial diesel sales is also positive as it indicates a reduction in subsidised diesel leakages,” he added.

Another trend sparked by the diesel subsidy rationalisation is a dramatic drop in diesel fuel sales near national borders. Quoting information supplied by an oil company, Datuk Amir Hamzah highlighted that diesel sales in these areas have dropped by as much as 40%, thus proving the move’s effectiveness at cutting off the outflow subsidised diesel across the border.

The minister then continued detailing that Malaysia’s diesel subsidy expenditure had increased tenfold form RM1.4 billion in 2019 to RM14.3 billion last year, hence why it was no longer sustainable by the government over the long term. He also adds that this was solely caused by market price increases, but also due to increased consumption.

"The amount of subsidised diesel used has surged by approximately 8%, from 6.1 billion litres in 2019 to 10.8 billion litres in 2023, despite no significant increase in new diesel vehicles during the same period. During this period, the sales volume of unsubsidised commercial diesel had decreased by two billion litres," recounted the minister further.

As a recap, diesel subsidy rationalisation saw Euro 5 B10 and B20 diesel prices across Peninsular Malaysia rise by RM1.20 (56%) from RM2.15 per litre to RM3.35 per litre. Euro 5 B7 grade diesel, on the other hand, also went up to a rate of RM3.55 per litre.