Starting in phases from now and to be completed by Sept 1, RON95 petrol will replace RON92 at a price of RM1.75 per litre as compared to RM1.70 per litre of RON92 while the price of RON97 will be increased by RM0.20 a litre to RM2.00. RON95 will also be a fixed price product while the price of RON97 will not be controlled by the Government. We view this as mildly good news for most consumers given that they will get an acceptable quality of petrol at a slightly lower price. We believe that the large percentage of drivers will make the switch to RON95 while luxury car owners will probably hold out given the perception issue. Impact on inflation will be minimal if any. The Government should also make some savings on subsidies which will be helpful given the projected high budget deficit.
What’s the difference between the RONs? RON stands for Research Octane Number which measures the ability of petrol to resist premature ignition when being compressed otherwise termed as its anti-knocking ability. Given that greater compression is generally related to greater power, it is usually perceived that a higher RON rating delivers greater power to a car. Nonetheless, as most cars are designed with a minimum RON rating, it is usually accepted that using a petrol with a higher RON rating than that minimally prescribed will not give any additional performance to a car. In other words, if a car specifications state that it can use RON95, no additional performance will be derived from using RON97. The higher the RON rating, the more difficult the petrol is to refine, hence the higher price.