KINIBIZ The first day of December saw the introduction of a new system of determining pump prices of RON95 petrol and diesel. The new managed float system is more responsive to changes in the price of oil in international markets, but it is by no means a true float.

Pump prices of RON95 petrol and diesel could change as frequently as every month under the new managed float system. The biggest change for Malaysian consumers is the loss of the fuel subsidy, which last year totalled more than RM20 billion.

The change to a managed float came about by circumstance. In a space of just four short months, crude oil prices have fallen by - at worst - 40 percent.

Brent crude, the most commonly used benchmark, is now trading at the lowest level in years and has been intermittently under US$60 a barrel this month.

The reasons for the crash are complex, but most experts cite a combination of slowing demand and oversupply from new shale oil production in North America. This new extraction method has made the United States almost self-sufficient in fossil fuels.

Then there is matter of Saudi Arabia and the Gulf states refusing to assume the role of a swing producer.

“The best thing for everybody is to let the most efficient producers produce,” Ali al-Naimi, Saudi Arabia’s powerful petroleum minister told reporters at the weekend.

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