Raymond Ooi
The escalation of the US-Iran conflict since late February 2026 has sent shockwaves through the global energy market.
Crude oil prices have surged due to maritime risks in the Strait of Hormuz and threats of retaliatory strikes on energy infrastructure. This could worsen into a full-blown energy crisis, affecting everyone in Malaysia.
For Malaysia, this presents a double-edged sword. While the nation benefits from increased petroleum revenue as a net exporter, it faces severe fiscal strain from a fuel subsidy bill that has ballooned to over RM4bn a month.
To prevent this volatility from spiralling into a systemic energy crisis, Malaysia must adopt a multi-pronged strategic approach.
Rethinking the fuel subsidy
The current blanket subsidy for Ron 95 is becoming unsustainable. With global prices soaring, the government is essentially subsidising the middle and upper classes at the expense of development funds.
It is time to implement the long-discussed targeted subsidy programme.
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The government can shift from suppressing prices at the pump to direct cash transfers for the low-income and middle-income groups. This will reduce the total subsidy bill while protecting the vulnerable from inflationary shocks.
Saving fuel, working smarter
Reducing national fuel demand is the fastest way to ease a supply crunch without waiting for new infrastructure. This includes installing optical sensors that automatically switch off electrical appliances when not in use, reducing wastage.
The Ministry of Human Resources has already begun urging the private sector to adopt flexible work arrangements.
A national “energy conservation month” could mandate a four-day working week for non-essential civil servants to reduce peak-hour traffic and fuel consumption.
A 20% reduction in commuting days would translate directly into lower national fuel demand and reduced pressure on the federal subsidy budget.
Energy-saving measures in public facilities and industrial operations can also contribute substantially.
Solar and the regional grid
A longer-term solution is needed to reduce fossil fuel dependency. Solar energy deployment should be intensified.
Energy companies like Tenaga Nasional can facilitate the use of available space for solar power, with the most efficient panels installed extensively on rooftops of large buildings and along highway corridors.
The Corporate Renewable Energy Scheme (CRES) already allows more businesses to bypass the grid and use self-generated solar power.
Tax rebates for electric motorcycles, cars and commercial delivery vehicles can further electrify the logistics sector, cutting fuel demand substantially.
Industries in logistics, manufacturing and transport are already implementing both immediate and long-term measures to manage fuel costs – improving vehicle and machinery efficiency, exploring electric alternatives for oil-powered equipment, and optimising transport routes to cut diesel consumption.
In response to shipping bottlenecks (eg in the Strait of Hormuz), ships are diversifying logistics routes and sourcing suppliers closer to production sites to avoid high transit costs.
Fuel-intensive industries are also conducting rigorous energy audits, often shifting to smart-grid technologies to manage energy consumption in real time.
Data centres, where energy can account for up to 60% of operating costs, are accelerating the adoption of alternative energy solutions, including on-site solar, while exploring hydrogen fuel cells. Advanced liquid cooling and “free cooling” techniques are being adopted to reduce reliance on energy-intensive mechanical cooling systems.
The development of optical and photonics-based technology integrated with AI chips is also gaining momentum – replacing electrical interconnects with light-based data transmission that offers higher speeds, lower latency and much less heat generation.
On the regional front, the Asean Power Grid (APG) is key to sustainable energy security. Bilateral electricity trade with Laos, Thailand and Singapore – already under way through the Lao PDR–Thailand–Malaysia–Singapore power integration project – is widening the resource pool.
Grid integration creates a mutual-defence mechanism where regional surpluses can offset local deficits, stabilising electricity costs even when gas prices remain high.
Turning crisis into opportunity
Malaysia’s position as an oil producer offers a temporary financial cushion. But the real threat lies in the subsidy trap and imported inflation.
By combining aggressive demand reduction with extensive solar deployment and deeper regional grid integration, Malaysia can turn this geopolitical crisis into a victory for its national energy security.
Dr Raymond Ooi is a professor of quantum and laser science at the Department of Physics, University of Malaya.
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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