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Oil prices surged toward the last quarter of 2010 to trade above US$90 (RM276.12) a barrel, raising concerns of higher food and fuel prices, reduced purchasing power and threatening the global economic recovery.

Analysts are expecting prices to hit US$100 (RM306.80) this year.

In developing countries, inflation risks pushing millions below the poverty line as food takes up a high proportion of their incomes, raising the spectre of food insecurity.

Inflation and high food prices also carry political risks for governments the world over as they lower the standard of living for segments of society, creating resentment and unrest.

The International Energy Agency (IEA) warns that the global economy is under threat due to oil price entering a “dangerous zone.”

According to IEA, oil import costs for member countries of the Organisation for Economic Cooperation and Development (OECD) have shot up by US$200bil ((RM614bil) to US$790bil (RM2.4tril) at the end of 2010.

The higher oil bill is equal to a loss of income of 0.5% of the OECD combined gross domestic product, said IEA.

“It is not in the interest of anyone to see such high prices,” said IEA’s chief economist Fatih Birol.

“Oil exporters need clients with healthy economies but these prices will sooner of later make the economies sick, which would mean the need for importing oil will be less.”

Oil prices have been rising on the back of strong demand from China, India and a recovery in the United States’ economy

In Malaysia, higher oil prices in the global market saw the price of RON97 petrol increased by 10sen to RM2.40 on Jan 5, 2011. The price of kerosene also went up by 10 sen to RM2.50 per litre.

RON97 last increased by 15 sen to RM2.30 per litre on Dec 1, 2010.

On Dec 4, 2010, the Government cut the subsidy for the widely-used RON95 petrol by 5 sen. This increased the price of RON95 to RM1.90 per litre.

Despite the increase, Malaysia’s retail prices remained lower than those in neighbouring countries such as Indonesia, Singapore and Thailand.

The price per litre of RON95 in Indonesia is RM2.46, Singapore RM4.36 and Thailand RM4.25.

Malaysia spends an estimated RM73bil a year to keep the price of petrol, flour, sugar and other items low.

Malaysia’s subsidy rationalisation is necessary as part of the Government’s efforts to cut the country’s budget deficit, which soared to 7% of its gross domestic product in 2009, the largest ever in 20 years, on the back of a slowing global economy and subsidy spending.

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PETALING JAYA: The price for premium petrol RON97 will be 10 sen higher at RM2.50 per litre from today.

Malaysian Petrol Dealers Association president Datuk Hashim Othman said it had received the confirmation about the price increase from the Finance Ministry.

“It’s a monthly review based on the world oil price.

“The Finance Ministry performed the assessment and decided on the price increase,” he said when contacted yesterday.

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PETALING JAYA: The price of premium oil RON97 will be determine at the end of each month due to the managed float of oil price, says Domestic Trade, Consumerism and Co-operatives Minister Datuk Seri Ismail Sabri Yaakob.

“We will calculate the average price of oil price from the 1st to the 27th of each month and the average price will determine the price for the next month,” he said after launching Bank Rakyat i-Debit card Tuesday.

The price of RON97 increased by 10 sen to RM2.50 per litre, earlier this month.

Ismail Sabri said this would mean that the price of RON97 would fluctuate every month as it depended on the price of crude oil in the global market.

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