RimbaWatch
Roughly 20% of all global fossil fuel supply chains flow through the Strait of Hormuz.
Since the US-Israeli military strikes on Iran commenced on 28 February, fossil fuel prices throughout the world have skyrocketed. In Southeast Asia, neighbours such as the Philippines and Thailand are facing fuel shortages and declarations of a state of emergency.
While Malaysia has not currently been affected by supply issues, the government’s blanket subsidies for Ron 95 petrol have become far costlier than originally planned. Within a one-month period, the unsubsidised market price of Ron 95 petrol in Malaysia rose to RM3.87/l – a significant increase.
By committing to subsidising the price of Ron 95 to RM1.99/l for the foreseeable future, monthly fuel subsidy bills for Malaysia have risen from RM0.7bn per month to RM4bn per month.
This has raised concerns from government representatives, think tanks and pundits alike about the fiscal sustainability of fuel subsidies in the current geopolitical context.
One proposal to reduce the government’s fuel subsidy bill has been to implement work-from-home initiatives throughout the country.
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On 1 April, it was announced that employees of government ministries, agencies, statutory bodies and government-linked companies could work from home beginning on 15 April.
While this is a good measure to reduce fuel consumption, expanding work from home to all sectors would have myriad benefits. The benefits of implementing work from home in this context can be calculated adopting the following conservative parameters.
The employed population of the Klang Valley stands at around 4.1 million. A 50% work-from-home arrangement would cover 2.05 million workers. An average round-trip commuting distance in the Klang Valley is 20km; and average fuel consumption in heavy traffic of 0.11l/km.
Based on these parameters, the average commuter in the Klang Valley uses 2.2 litres of petrol each day to commute to work. If just 50% of the Klang Valley’s working population were able to work from home, this would result in the avoidance of 4.5 million litres of petrol per day, translating to the avoidance of 90 million litres of petrol per month.
Given that the current subsidy is RM1.88/l, this would translate to fuel subsidy savings of RM169m per month. If the current geopolitical climate persists or worsens indefinitely, this could translate to subsidy savings of RM2bn over a 12-month period.
It must be noted that this figure, focusing on the Klang Valley alone, reflects just 23% of Malaysia’s entire working population. Mandating work from home for the whole country could potentially save up to RM1bn per month, depending on the ratio of the population able to work from home.
It is important to note that the benefits of this go beyond improving Malaysia’s fiscal position and employee productivity.
Data suggest that the vast majority of people in Malaysia commute to work alone, and that the vast majority of personal vehicles in Malaysia are internal combustion engine cars, which run on harmful fossil fuel energy – the leading driver of air pollution and climate change today.
Air pollution is estimated to cost Malaysia RM303bn annually in public health-related costs, roughly 20% of gross domestic product (GDP).
A further 32,000 entirely preventable lives are lost every year in Malaysia due to air pollution, with respiratory illnesses being the second leading cause of death in the country.
Given that 70% of the Klang Valley’s air pollution comes from cars, the removal of two million cars in the Klang Valley alone would drastically improve the Klang Valley’s air quality, improving public health and overall liveability.
This would also avoid an estimated 10,400 tonnes of carbon dioxide emissions per day, 208,000 tonnes per month or 2.5 million tonnes per year – equal to the annual emissions of entire countries such as Fiji – reducing Malaysia’s contribution to global climate change.
Klang Valley commuters waste an estimated 580 hours in traffic every year, costing them an estimated RM9,000 annually in vehicle maintenance and fuel.
Further, Malaysia is estimated to have already used up its fair share of the global carbon budget, which raises the need for rapid alignment with decarbonisation pathways.
The current spike in fossil fuel energy prices underscores the need for structural changes in Malaysia’s transport accessibility, energy sustainability and security, with fossil fuels being an increasingly scarce, expensive and polluting source of energy.
Given this, the following long-term measures should be undertaken by the Government of Malaysia:
Prioritise public transport: If the conflict worsens, the total subsidy bill for Malaysia could exceed RM48bn over a 12-month period. Based on recent estimates, this could instead fund 15,000 electric buses, 30,000km of covered walkways, 60,000km of protected bicycle lanes and 720 electric train sets.
Malaysia requires budgetary reallocations to support a vast uptake of public transport and walkability across the country in both urban and rural areas, which would reduce the need for imported petrol and diesel substantially.
Phase out fossil fuel energy: Even before the conflict, the cost of solar per MWh in Malaysia was already lower than fossil fuel alternatives such as coal and gas.
Solar energy is less susceptible to geopolitical tensions and therefore offers a viable alternative for Malaysia’s decarbonisation and energy security.
Accordingly, Malaysia should plan for a phase-out of polluting coal and fossil gas power plants and their replacement with new renewable capacity. – RimbaWatch
The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.
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