(April 24): In today’s “flat” energy world, Malaysia finds itself on the same oil-price roller coaster as everyone else — one moment plunged by the Covid-19 collapse, the next jolted by recovery and geopolitical flare-ups. In the first quarter of 2020, Brent crude tumbled over 65% from its year-start levels, as global demand evaporated under lockdowns; by 2023, however, it had averaged US$83 (RM364.12) per barrel, down from US$101 in 2022 and roughly US$81 in 2024. US President Donald Trump’s “America First” energy agenda — unleashing a US shale surge, imposing tariffs on Chinese goods, and withdrawing from the Paris climate pact — amplified these supply-demand swings and regulatory uncertainty, forcing Malaysia to weather thinner trade surpluses, ringgit gyrations, and a bruised fiscal cushion.

By June 2024, Putrajaya had ripped up blanket diesel subsidies in Peninsular Malaysia, sending pump prices from RM2.15 to RM3.35 per litre — yet instead of leaving smallholders and truckers stranded, the government funnelled RM200 a month under the Budi Madani programme to vulnerable diesel-dependent groups.

Simultaneously, it retooled RON95 petrol aid to protect the bottom 85% of earners while phasing out support for the top 15%. In doing so, Malaysia transformed subsidy reform from a political liability into a fiscal advantage.

Recognising that volatility won’t abate, Malaysia has accelerated its pivot to renewables. The Green Technology Master Plan targets 40% renewable energy in the power mix by 2035 through solar, hydroelectric, and waste-to-energy projects. April 2024 saw the launch of Energy Exchange Malaysia (Enegem), a 100MW pilot auction exporting green power to Singapore and laying the foundation for an integrated Asean grid. The 2023 National Energy Transition Roadmap commits to 70% renewable capacity by 2050, while the 2024 Aviation Decarbonisation Blueprint and the 2023-2040 Circular Economy Roadmap set ambitious net-zero and resource-efficiency milestones across transport and industry.

Despite the green rush, oil and gas remain pillars of the economy — making up roughly 7% of gross domestic product (about RM124 billion in 2022), 15% of exports, and 20% to 30% of federal revenue, buoyed by Petronas’ RM375 billion haul that year. Natural gas alone contributed RM52 billion in 2024, powering factories and turbines nationwide. Paradoxically, Malaysia still imports more refined products than it exports — an inefficiency the government plans to remedy through expanded downstream capacity at Pengerang.

To our north and east, the Chinese energy juggernaut looms larger by the day. In 2023, it consumed 16.4 million barrels per day of liquid fuels — more than triple India’s demand — and imported 11.3 million barrels per day of crude for its refineries and petrochemical complexes. Yet nearly 80% of those imports must pass through the narrow Strait of Malacca — a vulnerability Admiral Hu Jintao dubbed the “Malacca Dilemma” in 2003. While Beijing has built pipelines through Myanmar and Central Asia to bypass the choke point, most of its oil still flows past our shores, intertwining Malaysia’s economic fortunes with every Sino-American flare-up and Indian Ocean security calculus.

That interdependence can be a vulnerability — or an opportunity. Malaysia’s best hedge is diversification: ramp up renewable capacity and green hydrogen, deepen petrochemical value chains at Pengerang, and modernise refining and logistics under the new Oil, Gas and Energy Services (OGSE) Blueprint. Pair that with tax reforms to ease fiscal reliance on hydrocarbons, deeper financial markets to absorb external shocks, and targeted subsidies that protect the most vulnerable — and Malaysia will not just weather the storm but set its sails to harness every gust in Asia’s unfolding energy century.

Economist Samirul Ariff Othman is an adjunct lecturer at Universiti Teknologi Petronas, international relations analyst and a senior consultant with Global Asia Consulting.