The country is set to adopt a managed floating mechanism to fix petrol and diesel prices. The mechanism is expected to be implemented after the National Economic Council meets on Dec 1.

shahrir samad 01 According to Bernama, Domestic Trade and Consumer Affairs Minister Shahrir Abdul Samad said the mechanism would fine-tune the existing price managing system in the country to more effectively deal with fluctuating world crude oil prices.

He said the introduction of the floating mechanism was vital in light of dipping oil prices.

Shahrir added, compared the average price of crude oil prices in the middle of this month, the prices were now falling below US$50 per barrel, a drop of between US$13 and US$14 per barrel within a week.

"Such a significant drop would need a clear mechanism where the government can define the changes in retail prices accordingly," he told reporters after chairing the ministry's weekly post-cabinet meeting in Putrajaya yesterday.

Keep subsidy as income

Shahrir said among the components to be included in the mechanism was the possibility of a 30 sen fuel subsidy for every litre to be given to motorists when necessary and the possibility of a minimum fuel price.

petrol price hike before increase panic consumers 040608 01 "When we implement the managed floating mechanism for fuel prices, it would be based on the average market price and the practicality of the subsidy will be further studied.

"I feel if prices are low enough, the government need not give subsidies. Instead, the government can keep it as an income. This is what we will be discussing," he said.

He explained that the extra income from the drop in world crude oil prices would come in handy for the government, especially during the current global financial crisis.

Previously, Shahrir had revealed that the government should also profit from low fuel prices to help cushion the economic crisis.