Surging global energy prices puts Malaysia on alert for higher costs

SURGING global oil, gas and coal prices are putting renewed pressure on Malaysia’s energy, transport, business and household costs, prompting the government to prepare for prolonged supply disruptions and diversify sources of fuel and other key inputs.

Economy Minister Akmal Nasrullah Mohd Nasir said today that global supply risks had shifted from managing temporary shocks to preparing for disruptions that could persist, increasing the potential for higher costs to feed through the Malaysian economy.

Brent crude exceeded US$120 a barrel this week, after averaging US$90.88 in August, up 8.9 per cent from US$83.42 in July. LNG prices rose 13.2 per cent to an average of US$21.87 per million British thermal units (MMBtu) in August from US$19.32 in July and were approaching US$30 by mid-September.

Coal prices also reached US$148 a tonne on Sept 10, compared with an August average of US$130.67, adding to electricity-generation costs.

The higher energy prices come as Malaysia’s transport inflation accelerated to 2.0 per cent in August from 1.4 per cent in July, while inflation in housing, water, electricity, gas and other fuels rose to 2.1 per cent from 1.8 per cent.

Food and beverages inflation also edged up to 1.9 per cent from 1.8 per cent, although overall inflation remained at 1.9 per cent.

Akmal said the government would prioritise keeping domestic supply chains functioning, ensuring adequate supplies of essential goods and preventing external cost pressures from excessively affecting household welfare and economic activity.

“Since March 2026, international markets have adjusted through inventory adjustments, optimising supply sources and diverting trade routes to reduce the impact of disruptions to raw materials and production inputs.

“However, developments in West Asia in September show that uncertainty risks are rising again,” he said after the 15th 2026 meeting of the National Economic Action Council (MTEN), chaired by Prime Minister Datuk Seri Anwar Ibrahim.

The government will strengthen fuel security by diversifying imports, optimising domestic production and securing longer-term supply agreements.

Malaysia is sourcing crude oil and petroleum products from multiple regions, including the Americas, while exploring alternative sources in Africa to reduce reliance on any single supplier or supply route.

Akmal added that Malaysia and Thailand have also strengthened energy cooperation through new production-sharing and gas-sales agreements for Block A-18-01 in their Joint Development Area.

For households, the government has expanded electricity-bill protection to domestic consumers using up to 800 kilowatt-hours a month, from 600 kWh previously, with exemptions from the Automatic Fuel Adjustment, retail charges and sales and service tax from September through Dec 31.

Peak electricity demand reached 21,949 megawatts on Sept 9, 4.7 per cent above the August average, although Akmal said this remained within the reserve margin supported by the existing electricity system.

Food supplies remained broadly stable as of Sept 13, although egg prices have risen sharply. Grade C eggs increased from RM4.07 per 10 eggs in July to RM4.50 in August and RM4.81 in early September.

Businesses are also facing higher operating and working-capital costs as supply conditions become more challenging.

Bank Negara Malaysia’s RM5 billion SME Stabilisation Relief Facility had approved RM2.8 billion in financing involving more than 4,900 SME accounts as of Aug 7.

A separate Credit Guarantee Scheme provides up to RM10 billion in guarantees for SMEs, including microenterprises, with more than RM5 billion already utilised.

Bank Negara’s assessment presented to MTEN projected Malaysia’s economy to grow about 5 per cent in 2026, with headline inflation remaining within a 1.5 to 2.5 per cent range. It found that most firms continued to obtain necessary raw materials, with some switching to alternative suppliers, although operating costs and working-capital requirements were rising.

The government is also seeking to reduce Malaysia’s longer-term exposure to global supply shocks by attracting investment and diversifying trade. A multi-agency workshop led by the Malaysian Investment Development Authority (MIDA) identified 52 intervention measures and economic opportunities across investment, trade and capital markets.

Among the proposals is positioning Malaysia as a “World+1” destination — a stable, neutral and secure base for companies pursuing de-risking strategies.

Priority sectors include electrical and electronics and semiconductors, aerospace and maintenance, repair and overhaul, medical devices, automation, green energy and critical minerals.

MIDA also identified 36 potential export markets, including 23 new markets, while opportunities were identified in oil and gas, construction and reconstruction activities in West Asia.

Akmal said MTEN would continue coordinating the government’s response as global conditions evolve, with meetings increased as necessary to accelerate implementation of measures.

“We need to acknowledge that global supply-chain disruptions can increase operating costs, put pressure on businesses and affect market confidence. But this situation also creates room for us to strengthen national capacity, diversify supply sources, open new markets and attract quality investments,” he said.

“This crisis is not merely about oil prices. It is a test of the resilience of the national economy — from supply, prices and business costs to jobs, investment and the wellbeing of the people.” - September 18, 2026