Diesel subsidies drain Malaysia’s economy through smuggling, while rising costs silently push up prices of everyday goods
YOU have probably never lost sleep over what fuel a lorry uses. But right now, that question is quietly shaking Malaysia’s economy.
Here is the strange situation we are in: pumping petrol into your family car feels cheap, thanks to government subsidies. But filling up a diesel truck? That costs significantly more than what our neighbours in Thailand or Indonesia pay. And while politicians often focus on RON95 prices, diesel remains the bigger issue quietly affecting transport costs across the economy.
Diesel isn’t just for the uncle driving a Hilux; it is the bloodline of everything you buy. It is the silent driver of everything. Think about your breakfast roti canai. The flour cames on a diesel-powered lorry, the cooking oil arrives via a diesel truck, and the eggs? Diesel. Even the cili boh used for the sambal was likely hauled by a vehicle burning diesel.
Now zoom out: construction materials, industrial machines, cargo ships and the buses that get workers to their jobs – almost all run on diesel.
When petrol prices go up, you feel it at the pump. Annoying, yes. But you may drive less or carpool.
If diesel prices go up, all goods you touch become more expensive. A lorry driver doesn’t have a choice – he must pay the higher price, then add that cost to the vegetables, cement or electronics he is delivering. Within weeks, inflation hits your wallet from every direction.
Petrol affects your commute while diesel affects your entire cost of living. That is why economists say diesel shocks are more dangerous. Petrol is a headache but diesel is a heart attack.
The neighbourhood problem
Here is our dilemma. Malaysia’s diesel is actually supposed to be subsidised. But something broken is happening: because our diesel is cheaper than in Thailand or Singapore (when subsidies work), millions of litres leak across borders every month.
Smugglers fill up here and sell there. The subsidy meant for Malaysian fishermen and farmers ends up powering lorries in Southern Thailand. But now, the government is trying to float diesel prices to match the region. The result? Our diesel becomes more expensive than our neighbours.
Suddenly, our own industries – the very backbone of our economy – face higher costs than their competitors in Vietnam or Indonesia. So, we are trapped: keep subsidising diesel and money bleeds out to smugglers. Remove subsidies and every factory, farm and shopkeeper suffers.
How do we navigate the swamp? How does Malaysia get out of this mess? Not by choosing petrol or diesel but by being surgical.
First, subsidies should be targeted rather than universal. Give diesel subsidies directly to actual users – fishermen, school bus operators, farmers and logistics companies registered with a clear card system.
Everyone else – luxury SUVs, older lorries that don’t haul goods for the public – pays market price. We already have the technology, like the SKDS system. Use it fully.
Second, stop pretending petrol is harmless. If we over-subsidise petrol, it encourages wasteful driving and clogs our cities. Slowly shift petrol subsidies towards public transport and EVs but do it in stages – don’t shock the lower-middle class overnight.
Many have long called for better train services. Given the choice, many would prefer to take the train to work. Yet, the same problem persists: the last mile. Why?
Third, enforce borders, not just prices. Install better tracking at northern and eastern borders to stop smugglers. What is the point of a subsidy if half of it disappears into a modified tank in a Thai-bound lorry?
The bottom line
Malaysia needs to realise that cheap petrol keeps voters happy but managing diesel prices smartly is what keeps the economy running. If we get diesel policy wrong, the price of bread, steel and medicine will all rise. The poor, many of whom don’t even own cars, will suffer the most.
We don’t need to choose between bankrupting the government or burdening the rakyat. We need the courage to subsidise smartly, not universally. Give diesel help only to those who truly move this nation. Let the rest pay fair prices because in the end, an economy that runs on diesel must run on honesty, not hidden costs.
Prof Datuk Dr Ahmad Ibrahim is affiliated with the Tan Sri Omar Centre for STI Policy Studies at UCSI University and is an Adjunct Professor at the Ungku Aziz Centre for Development Studies, Universiti Malaya. Comments: letters@thesundaily.com
The Sun Malaysia