KUALA LUMPUR, Oct 30: Starting Friday, petroleum will cost one sen moreper litre, diesel will cost two sen more per litre, while liquefiedpetroleum gas (LPG) two sen more per kilogramme.

Domestic Trade and Consumer Affairs Minister Tan Sri Muhyiddin Yassin saidtoday's Cabinet decision to increase the price of fuel was based on theincrease in world oil prices and the need to lessen the Government's fuelsubsidies. "One reason is the rise in cost of petrol and petroleumproducts. So the Government has to reduce the amount of subsidies it paysfor petrol.

"But the reduction in subsidies will be nominal. Currently the price ofoil is US$33.30 (RM126.54) per barrel, up from US$31 per barrel inSeptember," Muhyiddin told reporters after the Ministry's post-Cabinetmeeting. With the price hike, consumers will pay RM1.33 per litre for RON97 petrol, RM1.29 per litre for RON 92 petrol, 74.1 sen per litre fordiesel and RM1.31 per kilogramme for LPG.

Muhyiddin said the Government was still subsidising the price of fuel andthat without subsidies, consumers would, for instance, be paying anadditional 19 sen for a litre of petrol.

"The total amount of subsidies that the Government has paid from theperiod of January to November for fuel is RM3.236 billion." Muhyiddinbelieved the increase would not lead to inflation or a rise in prices ofother consumer goods as the consumer price index had remained relativelystable despite earlier increases in fuel prices.

The last fuel price hike was in May, where the price of petrol and dieselwent up by two sen, while the price of LPG up by one sen.

"We hope that consumers appreciate the fact the increase in prices hasbeen nominal. We know that some sectors will complain, but the Governmentis still subsidising the price of fuel." On whether there were more pricehikes in the future, Muhyiddin said prices were reviewed based on factorssuch as an increase in the cost of producing petroleum and the price ofoil in the world market.

"We review when we are forced to, namely when there is a rise in the costof production and the amount of subsidies the Government has to pay. Ifthe market is stable, we need not increase the price, but if the marketprice does go up the Government's burden is increased." Muhyiddin said theMinistry, together with the Finance Ministry, was still studying a newprice mechanism for fuel, especially in term of the economic impact itwould make if implemented.

He said the mechanism would be a modified version of the current automaticprice mechanism, which would take into account fluctuations in the priceof petroleum in the global market.

"Although the mechanism reflects the world market price of petroleum,consumers will still enjoy a certain degree of subsidy. We are still finetuning the mechanism.".