KUALA LUMPUR, July 31 — Falling world crude prices has prompted the Cabinet to consider cutting pump prices in Malaysia that had sparked a record 27-year-high inflation rate last month.
Several Cabinet ministers said a reduction in pump prices was discussed during the weekly meeting yesterday but declined to elaborate, saying Prime Minister Datuk Seri Abdullah Ahmad Badawi would make an announcement soon.
The government raised petrol prices by 41 per cent and diesel prices by 60 per cent early June, prompting protests and drove inflation to 7.7. per cent for that month as higher transport costs pushed other prices. Petrol is now sold at RM2.70 a litre from RM1.92 previously, while diesel shot up one ringgit to RM2.58 a litre currrently.
The government had said it could not afford fuel subsidies due to the soaring crude prices but is stilll providing a 30-sen discount to the market rate.
Crude oil fell from its lowest close in 12 weeks yesterday on speculation demand in Asia and the US may slow after near-record prices reduced consumption.
A US Energy Department report today may show that gasoline supplies rose for a fifth week, according to a Bloomberg News survey. Gasoline use has slipped for 14 straight weeks as high pump prices kept people closer to home, MasterCard Inc reported yesterday.
"The key consideration in the market this week has been demand destruction,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd in London. "All the warning signs about the US economy have prompted speculators to reduce their exposure so that the next layer of support is at US$117 (RM386).''
Crude oil for September delivery fell as much as 94 cents, or 0.8 per cent, to US$121.25 a barrel on the New York Mercantile Exchange. It was US$121.94 at 12.52pm London time. On Tuesday, it fell US$2.54, or 2 per cent, to US$122.19 a barrel, the lowest close since May 6. Prices have dropped more than US$25 a barrel, or 17 per cent, from their July 11 record.
Higher Education Minister Datuk Seri Mohd Khaled Nordin said the Cabinet discussed lower pump prices and the mechanics was being worked out which Information Minister Datuk Shabery Cheek confirmed but declined to elaborate.
Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said Abdullah would make the announcement at an appropriate time. He was quoted on Tuesday as saying the government might reduce fuel prices if crude oil prices stay at US$125 per barrel for at least three weeks.
Shahrir said if that was the case then a reduction in prices could come within the year to enable the Government to keep its pledge of maintaining a 30-sen per litre subsidy.
"Why not, it would be good news, right?" he told the Bloomberg News service.
-TMI
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