KUALA LUMPUR, Oct 12 — Malaysia, being a net oil and gas (O&G) exporter, is placed in a more advantageous position relative to its Asean peers in a rising oil price environment, said CGS-CIMB Research.
It noted that the largest chunk of the country’s energy trade surplus was contributed by liquefied natural gas (LNG) at RM21.5 billion in the first eight months of 2021, followed by crude petroleum (RM3.7 billion) and a rare surplus in petroleum products (RM1.6 billion).
“Assuming LNG moves in lockstep with oil prices, every US$10-per-barrel (US$1=RM4.18) increase in oil price improves Malaysia’s current account (CA) position by up to 0.4 per cent of Gross Domestic Product (GDP),” it said in a note.
The research house said as net O&G importers, Indonesia, Singapore and Thailand would incur higher O&G import bills.
For Malaysia, CGS-CIMB estimated additional government revenue of RM430 million for every US$1-per-barrel increase in crude oil price after adjusting for the weaker ringgit versus the US dollar, higher than the official guidance of RM300 million.
According to the research house, an extended oil price shock represents a windfall for producers and a tax on consumers but the distributional effects are dependent on fiscal contribution from the energy sector and energy subsidies at the expense of government finances.
It noted that governments in Malaysia, Indonesia, and Thailand have exerted some control over fixing retail prices for fuel, cooking gas, or electricity tariffs, thereby limiting the pass-through of higher energy prices to consumers.
As for Malaysia, the country imposes a ceiling on retail fuel price — RM2.05 per litre for RON95 petrol and RM2.15 per litre for diesel — and subsidises the difference while Thailand recently announced a cap on diesel pump price at 30 baht per litre and finances subsidies with its 10 billion-baht Oil Fuel Fund.
The blanket subsidy for RON95 petrol and diesel, the research house said, exposes Malaysia’s fiscal balance to a deterioration of RM2.2 billion or 0.1 per cent of GDP per US$10-per-barrel increase in oil price above US$60 per barrel.
CGS-CIMB noted that Brent/West Texas Intermediate crude oil prices has surpassed US$80 per barrel, rising by more than 60 per cent year-to-date due to supply constraints and surging demand amid economic re-opening.
Meanwhile, Moody’s Investors Service said rising oil prices will not preclude the recovery of airline profitability over the next one or two years as aircraft fuel is one of the largest operating costs for most airlines.
“Supply and demand fundamentals — including the return of passengers, supported by increasing vaccinations and less stringent barriers to travel — will have a greater influence on airlines’ earnings than will jet fuel prices, which will fluctuate with changing Brent oil prices,” it said.
In the longer term, Moody’s said, efforts to reduce aircraft emissions will increase airlines’ fuel expense as a percentage of revenue.
“Airlines will need to meet carbon reduction targets by buying carbon offsets, which will increase operating expenses, all else being equal. Airlines will look to pass these costs to customers, either via higher fares or express carbon offset charges.
“Express surcharges might require government or regulatory approval,” said the rating agency. — Bernama