KUALA LUMPUR: Calls to tap Petronas' profits to cushion surging fuel prices should be treated with extreme caution, with an expert warning the national oil company must remain a "last resort, not the first response" to market volatility.

The warning follows a proposal by Urumai chairman P. Ramasamy to establish a bipartisan parliamentary committee aimed at exploring the use of Petronas funds to expand fuel subsidies.

The proposal comes as global oil prices surpass US$100 per barrel amid escalating tensions in the Middle East.

Ramasamy argued that the government's monthly fuel subsidy bill, which has ballooned from RM700 million to RM3.2 billion, represents only a "fraction" of the national oil giant's net profit.

He contended that higher crude and LNG prices would naturally boost Petronas' earnings, providing a ready-made buffer to offset domestic price hikes.

However, oil and gas analyst Jamil Ghani cautioned that this "short-term fix" ignores sustainable policy options and the growing operational pressures on Petronas.

"Before considering any move to tap Petronas profits to expand fuel subsidies, it is critical to first exhaust more sustainable and prudent measures," he said.

He stressed that the immediate priority should be to reduce demand and manage fiscal pressures through behavioural and structural changes.

"The immediate priority should be to manage demand and reduce fiscal pressure through behavioural and structural adjustments," he said.

This includes encouraging energy-saving practices such as flexible work arrangements, reducing non-essential travel, increasing reliance on public transport and promoting more efficient fuel usage.

He also called for longer-term shifts, including "accelerating the adoption of alternative energy sources and strengthening local supply chains" to cushion the impact of global price shocks.

On subsidies, Jamil warned against broad-based expansion, saying it risks distorting consumption patterns and increasing long-term fiscal exposure.

"Fuel subsidies must also remain targeted and disciplined. Broad-based expansion risks distorting consumption patterns and increasing long-term fiscal exposure, particularly if higher-income groups shift towards subsidised fuel.

"Only after these measures are fully utilised should Petronas be considered, and even then, as a last resort," he said.

Jamil's caution echoes Petronas's own position that higher oil prices do not automatically translate into stronger profits.

The national oil company recently said while elevated crude prices may boost upstream revenue, "these gains would almost certainly be offset by increased costs across the value chain, resulting in broader pressures on the national economy".

"Higher crude oil prices may increase revenue from upstream production, but Petronas operates across the entire energy value chain," it said.

"This means that as prices rise, so do costs, for imported crude oil, refining, logistics, shipping and insurance, all of which are acutely affected when global supply chains are disrupted by geopolitical uncertainty."

Petronas added that "the financial impact on the company is therefore far more complex than a simple revenue calculation", pointing to Malaysia's position as a net importer of crude oil for domestic refining.

"Because the country imports a significant volume of crude oil and refined products, a sharp rise in global prices increases the national import bill considerably," it said.

Jamil reinforced this point, noting that Petronas is already operating under mounting financial strain.

"Over the past three years, its financial performance has been on a declining trend," he said.

He pointed out that Petronas' net profit fell from RM80.7 billion in 2023 to RM55.1 billion in 2024 and further to about RM45.4 billion in 2025, while revenue declined from RM343.6 billion to around RM266 billion over the same period.

"Higher oil prices today do not automatically translate into stronger profits," he said, citing "supply chain disruptions, elevated service costs, tighter logistics and financing pressures" that are eroding margins.

Jamil also highlighted a shift in Petronas' fiscal contributions to the government.

While dividends had been maintained at around RM32 billion in recent years, the payout for 2026 has been reduced to RM20 billion.

"This is a clear signal that Petronas is prioritising balance sheet strength and long-term sustainability over short-term fiscal extraction," he said.

Beyond financial pressures, he pointed to growing domestic risks, particularly the ongoing dispute with Sarawak over oil and gas rights.

"Sarawak's push to expand the role of Petros as a sole gas aggregator introduces uncertainty into Malaysia's petroleum framework," he said.

He added that the state's broader legal challenge against the Petroleum Development Act 1974 "goes to the foundation of Petronas' mandate" and "raises questions over the very basis on which Petronas operates as the national oil company".

"Fragmentation of roles, overlapping authority and legal uncertainty risk weakening coordination, affecting investment clarity and gradually eroding Petronas' position within the national energy system," he said.

Jamil warned that prematurely drawing on Petronas to fund larger subsidies could compound these pressures.

"Petronas is a national asset. It exists to protect the country in times of crisis, not to be drawn down at the first sign of pressure.

"If it is treated as the default response every time oil prices rise, there is a real risk that, over time, its financial strength and strategic capacity will be eroded."

He added that such an approach could leave Malaysia exposed in a more severe future crisis.

"When the next, more severe crisis comes, Malaysia may find that the very institution it relies on is no longer in a position to provide that protection," he said.

"Petronas has always stood as a strategic backstop for the nation. It must remain exactly that, a last resort, not the first line of response."