Evaluation of Impacts of the Rise in Energy Prices on Costs of Production and Living Expenses in Malaysia

Abstract

This paper examines the impacts of increasing energy prices on cost of production and living expenses of households in Malaysia. Analysis was done using an input-output price model that allows for the decomposition of the impacts into direct and indirect effects. An increase in electricity price was found to have minimal impacts on costs of production and living expenses of households. However, if both electricity and petroleum prices increased simultaneously, energy prices would have a considerable impact on production sectors and households. The indirect effect which captures the interdependencies among production sectors is most responsible for the increase in cost of production and living expenses.