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Malaysian Prime Minister Abdullah Badawi on Aug. 1 announced a new fuel price scheme to adjust domestic retail prices according to global oil prices on the first day of each month beginning in September. The plan does not amount to letting fuel prices float, and current fuel subsidies will stay in place, but nevertheless it signifies a closer alignment with market forces than Malaysians are accustomed to.
Malaysia is one of several Southeast Asian nations brainstorming ways to manage fuel price controls and social stability at home while facing high but volatile global energy prices. As countries come to grips with economic constraints driven by the cost of energy, they have begun thinking more intently about the role of fuel subsidies in the long run.
The day before Malaysia’s new fuel pricing scheme came to light, a top official in the country’s finance ministry said the administration was considering lowering the price of gasoline if global oil prices remain between $120-125 per barrel for two weeks. The implication was that Kuala Lumpur was willing to reverse the emergency fuel policy put in place in June, when the government — unable to keep paying for fuel subsidies while global prices soared — let the price of fuel rise 41 percent, stirring widespread protests.
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