What is the significance of the reduction of the RON95 price in Sabah?
By Datuk Ts Dr. Hj Ramli Amir, former President of the Chartered Institute of Logistics and Transport (CILT) Malaysia and Vice-President of CILT International for Southeast Asia
KOTA KINABALU: As of July 2025, the retail price of RON95 petrol in Malaysia has undergone a significant update.
The government has announced a targeted subsidy mechanism which reduces the price of RON95 to RM1.99 per litre for eligible Malaysians, down from the longstanding RM2.05 per litre.
This new rate is meant to benefit the majority of domestic drivers, including those in Sabah, provided they fall within the subsidy eligibility as determined by the government’s criteria.
Has the Change Applied to Sabah?
Official announcements specify that the new RM1.99 RON95 price applies across Malaysia for Malaysians, including those in Sabah, under the targeted subsidy scheme. Importantly, eligibility is based on citizenship and the government’s future means-testing (typically excluding foreign motorists and possibly high-income groups).
Previous fuel policy adjustments, such as those for diesel, had exempted Sabah and Sarawak; however, for RON95 this new targeted approach is described as nationwide for qualified Malaysians.
Impact on Individuals in Sabah
Immediate Benefits
Cost Savings: Sabahans eligible for the subsidy now pay RM1.99/L, providing direct savings at the pump compared to the previous RM2.05/L.
Household Relief: With Sabah’s generally lower median income compared to the national average, reduced fuel costs are particularly impactful in stretching household budgets further.
Inclusive Relief: The scheme is designed to benefit individual Malaysians, including gig workers, youths, and rural populations who rely heavily on motorcycles and personal vehicles for mobility.
Impacts on Logistics and Transport Sectors in Sabah
Logistics and Goods Transport
Input Cost Relief: Lower RON95 prices ease operating expenses for logistics providers using petrol vehicles, which is beneficial in a supply chain landscape already challenged by Sabah’s geography.
Competitiveness: The price reduction can bolster Sabah-based hauliers’ and small traders’ competitiveness when ferrying goods across the state or to Peninsular Malaysia.
Public and Commercial Transport
Broader Support: School buses, taxis, and public transport operators generally benefit from stable or improved fuel subsidies, supporting fare stability and operational continuity.
Sector Segmentation: However, the logistics sector in Sabah relies more heavily on diesel (which has a different subsidy structure). For petrol-driven fleets, the new RON95 price offers tangible, if lesser, business input savings.
Why This Matters for Sabah
Economic and Social Significance
The lowering of the RON95 subsidized price matters greatly:
Eases Cost of Living: Lower petrol prices slow the pace of general inflation, especially for food and essential goods, most of which are freighted across long distances within Sabah or from Peninsular Malaysia.
Rural Inclusion: The measure especially benefits rural and semi-urban Sabahans with limited alternative transport modes, preventing further isolation due to rising fuel expenses.
Equity and National Integration: Applying the same eligibility mechanism and relief across East and West Malaysia demonstrates policy equity, important for national unity and addressing persistent perceptions of neglect.
Broader Implications
Political Stability: Keeping prices stable or lower is politically sensitive, especially in Sabah, where cost-of-living issues are acute and public perception of federal policy matters for social cohesiveness.
Conclusion
The RON95 price drop to RM1.99 per litre for eligible Malaysians, covering Sabah, is a meaningful policy move. It provides immediate financial relief, supports lower living costs, and promotes fair subsidy distribution. For Sabah, where petrol fuels daily transport and economic activity, the change preserves purchasing power and tempers inflation—key for social and economic stability. Continuous monitoring of rollout details and eligibility criteria, however, remains crucial to deliver the policy’s benefits without unintended exclusion or confusion.
RON95 Price Relief vs. Higher Living Costs:
The Complex Reality for Sabahans
The reduction in RON95 petrol prices to RM1.99 per litre represents meaningful relief for Malaysian households, but the impact for Sabahans must be understood within the broader context of the state’s disproportionately higher cost of living compared to Peninsular Malaysia.
While the fuel subsidy provides tangible savings, it operates against a backdrop of structural economic disadvantages that significantly erode its purchasing power benefits.
The Fuel Savings Reality
The RM0.06 per litre reduction from RM2.05 to RM1.99 translates to modest but measurable household savings. For a typical Sabahan family consuming 120 litres monthly, this represents RM7.20 in monthly savings or RM86.40 annually. Rural households with higher fuel consumption due to longer travel distances and reliance on pickup trucks could save up to RM144 annually.
However, these savings must be viewed in relative terms. For bottom 40% (B40) households earning around RM3,000 monthly, the fuel savings represent just 0.24% of monthly income, while middle-income families see an even smaller 0.12% impact. The absolute savings, while welcome, pale in comparison to the broader cost-of-living pressures facing Sabahan households.
Median household income comparison shows Sabah below national average despite higher living costs
Sabah’s Economic Disadvantage
The fundamental challenge lies in Sabah’s position as having both higher living costs and lower incomes compared to Peninsular Malaysia. Sabah’s median household income of RM6,171 sits below the national average of RM6,338, while states like Selangor (RM12,233) and Kuala Lumpur (RM13,325) enjoy incomes that are roughly double. This income gap has persisted and actually widened over decades, with Sabah falling from 7.5% above the national average in 1984 to 37% below by 2022.
The cost structure adds insult to injury. Sabah requires RM1,747 monthly for decent food expenditure compared to the national average of around RM1,600. More critically, Sabah records the highest extreme poverty rate in Malaysia at 1.2%, six times the national average of 0.2%. This means that while fuel costs decrease marginally, the fundamental economic challenges remain deeply entrenched.
Transport and Logistics Cost Premium
The higher cost of living in Sabah stems significantly from transport and logistics expenses. Industry experts estimate that transport costs in Sabah are 30-50% higher than in Peninsular Malaysia. This stems from several structural factors:
Geographic isolation forces reliance on sea freight and air cargo for most consumer goods, with shipping times of 5-7 days from Kuala Lumpur adding both time and cost. Poor infrastructure connectivity compounds these challenges, with inadequate road networks and limited public transport options.
Market concentration in shipping and distribution creates limited competition, allowing transport providers to maintain premium pricing. The cabotage policy, while providing some relief, has not fundamentally altered the cost structure for moving goods to Sabah.
These transport premiums cascade through every aspect of daily living. A simple example illustrates the problem: chicken prices in Sabah can reach RM16.50 per kilogram, prompting calls for urgent government intervention, as “when a Sabahan can only afford 1kg of chicken while someone in the peninsula can buy 2kg for the same price, this highlights a fundamental issue of inequality”.
Real Purchasing Power Impact
The RON95 price reduction’s limited impact becomes clearer when examined against purchasing power realities. Cost-of-living analysis suggests Sabah’s expenses are at least 30% higher than West Malaysia across most categories. Housing costs demonstrate this starkly—a simple terrace house in Sabah approaches RM1 million, with semi-detached properties starting at RM2.5 million.
For context, the annual fuel savings of RM86-144 for most households represents less than one month’s difference in housing costs between Sabah and comparable areas in Peninsular Malaysia. The fuel relief, while psychologically important, barely makes a dent in the structural cost disadvantages Sabahan families face.
Sectoral Economic Implications
The limited nature of fuel savings has broader economic implications. Lower-income households experience the most acute pressure, as over 42% of Sabahan households earn less than RM4,000 monthly compared to 26% nationally. For these families, even modest fuel savings help, but they cannot address the fundamental challenge of inadequate income relative to living costs.
Middle-class families face their own squeeze. The fuel savings provide minor relief, but they continue to pay premiums on virtually everything else—from groceries transported from Peninsular Malaysia to locally produced goods affected by higher input costs.
Businesses and entrepreneurs benefit minimally from lower fuel costs since they represent a small fraction of total operating expenses. Transport logistics, rent, utilities, and imported materials continue to impose the primary cost burdens that make Sabahan businesses less competitive.
The Broader Policy Context
The RON95 price reduction occurs within Malaysia’s broader subsidy rationalization efforts, with the government saving approximately RM4 billion annually through targeted fuel subsidies. However, for Sabah, this policy operates more as damage control than transformation. The state continues to depend heavily on federal transfers and subsidies to maintain basic affordability.
More fundamentally, Sabah’s economic challenges require structural solutions rather than marginal price adjustments. Issues like port efficiency, road connectivity, market competition, and skills development demand sustained investment and policy attention that fuel subsidies cannot address.
Long-term Sustainability Questions
The current approach raises sustainability concerns. While maintaining lower fuel prices provides short-term relief, it may delay more fundamental economic reforms Sabah needs. The state’s continued dependence on subsidies and federal transfers inhibits the development of more resilient, self-sufficient economic structures.
Additionally, the targeted subsidy mechanism, while more efficient fiscally, creates potential future vulnerabilities. As eligibility criteria evolve and potentially tighten, Sabahan households could face renewed cost pressures without having addressed the underlying structural disadvantages.
Conclusion
The RON95 price reduction to RM1.99 provides welcome but limited relief for Sabahan households. While annual savings of RM86-216 help individual families, they represent a fraction of the broader cost-of-living disadvantages that Sabahans face due to geographic isolation, poor infrastructure, and limited economic diversification.
The fuel subsidy essentially functions as a small buffer against much larger structural economic challenges. For meaningful impact, Sabah requires comprehensive policy interventions addressing transport infrastructure, market competition, skills development, and economic diversification. Until these fundamental issues receive attention, even well-intentioned measures like fuel subsidies will provide only marginal relief against the state’s persistent cost-of-living pressures.
The policy’s true test will be whether it forms part of a broader development strategy for Sabah or remains an isolated measure that provides temporary comfort while deeper economic disparities persist. For now, Sabahan families can appreciate the modest savings at the petrol pump, but the larger challenge of achieving economic parity with Peninsular Malaysia remains largely unaddressed.
