With Malaysia’s CPI inflation rate at 1.4% in February, the latest diesel price hike is unlikely to lift the headline inflation in March, according to Bank Muamalat Chief Economist Dr Mohd Afzanizam Abdul Rashid.
Speaking to BusinessToday, he said the inflationary impact may not be visible immediately, although price pressures could begin to creep up in April.
Afzanizam said the overall effect on headline inflation should remain limited as subsidised RON95 is still widely available to Malaysians with a valid driving license. He also noted that diesel carries only a small weighting in the CPI basket at 0.2%, suggesting that the direct impact on overall inflation is likely to be minimal.
Still, he cautioned that the risk lies more in the indirect effect of higher diesel prices, particularly when businesses or sectors that do not qualify for targeted subsidies such as logistics begin passing on additional operating costs to customers.
“Another aspect that the government needs to be cautious about is profiteering activities among businesses arising from the current situation. Consumers are generally price takers and therefore will pay whatever price is asked by sellers. Monitoring and strict enforcement are extremely critical to ensure price hikes do not spiral,” he added.
At the same time, he described the government’s latest subsidy rationalisation measures as a pragmatic approach aimed at balancing fiscal discipline with the need to keep the cost of living and cost of doing business manageable. The announcement included a cut in the BUDI95 subsidised quota to 200 litres, purchase limits for diesel in Sabah, Sarawak and Labuan, while maintaining e-hailing benefits at 800 litres.
Dr Afzanizam added that key transport-related sectors remain protected under the subsidised diesel fleet card scheme.
“Those who are eligible for subsidised diesel fleet card includes school buses, express buses, stage buses, minibuses, taxis, rental cars, funeral vans and lorries, ambulances, and fire engines. Hence, logistic sectors should continue to enjoy the subsidies,”
For pricing context, retail fuel prices for 26 March to 1 April 2026 were reported at RM5.52 per litre for diesel in Peninsular Malaysia, RM5.15 for RON97, RM3.87 for unsubsidised RON95, while subsidised RON95 remained at RM1.99
