Why is RON97 petrol price floating while RON95 and diesel are subsidised?

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RON97 Petrol Floats While RON95 and Diesel Remain Subsidised Due to Government Policy

The price of RON97 petrol will be determined by a weekly float system, reflecting current market conditions, while RON95 petrol and diesel will continue to be sold at capped prices through government subsidies. This approach allows for market-driven pricing for premium fuel while ensuring affordability for essential fuels. The government is providing a subsidy of 33 sen per litre for both RON95 petrol and diesel this week to maintain their retail prices at RM2.20 and RM2.18 per litre, respectively. Without this subsidy, RON95 would cost RM2.53 per litre and diesel RM2.51 per litre, reflecting global crude oil prices that have reached US$76 per barrel, with refined petrol and diesel products priced between US$87 and US$88 per barrel.
Weekly Float System for RON97

The decision to implement a weekly float system for RON97 petrol means its retail price will adjust based on prevailing global market rates for crude oil and refined petroleum products. For the current week, RON97 is priced at RM2.66 per litre, a notable increase from its previous price of RM2.44 per litre. This shift signifies a move towards market-based pricing for higher-octane fuel, allowing its price to fluctuate in response to international supply and demand dynamics and the cost of raw materials.
Government Subsidies for RON95 and Diesel

In contrast, the Malaysian government has chosen to maintain the retail prices of RON95 petrol and diesel at RM2.20 and RM2.18 per litre, respectively. This is achieved through direct subsidies paid to fuel providers. For the current week, the government is allocating 33 sen per litre for these fuels. This policy aims to cushion the impact of rising global fuel prices on the general public and essential transportation costs.
Rationale Behind Differentiated Pricing

The differentiated pricing strategy reflects a common governmental approach to managing fuel costs, balancing market realities with social welfare considerations. By allowing RON97 to float, the government can reduce its direct financial exposure on this premium product, while the subsidies on RON95 and diesel ensure that the cost of basic transportation remains accessible for a broader segment of the population. This approach acknowledges that RON95 and diesel are typically used by a larger number of consumers and for more essential purposes, making their affordability a key public interest.
Financial Allocation for Subsidies

The commitment to subsidising RON95 and diesel comes with a significant financial outlay. The federal government has allocated RM3 billion until the end of 2018 to cover the costs associated with maintaining the capped retail prices for these fuel types. This substantial allocation underscores the government's intention to provide financial relief and ensure price stability for these essential commodities throughout the remainder of the year, despite fluctuations in international crude oil prices.

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Why is RON97 petrol price floating while RON95 and diesel are subsidised?

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