The government is concerned that the spike in global oil prices could affect the country's multi-billion-dollar development programmes, Prime Minister Abdullah Ahmad Badawi said today.

"We are observing the situation. We know that it is going to be a very serious development and it may have some impact on our proposal for development," he told reporters.

Abdullah in July launched a RM177 billion development initiative to cut poverty in northern peninsular Malaysia - the Northern Corridor Economic Region.

He has also unveiled plans for the Iskandar Development Region in Johor, which aims to attract RM50 billion over five years and turn the area into a new Asian metropolis.

Abdullah said domestic petrol prices, which were last raised in February 2006 when world oil prices were US$60 dollars a barrel, will likely remain unchanged at around RM1.92 per liter until year-end.

"We have not decided whether we want to raise the price or what other action we may wish to take. But we are also mindful of the fact that some time ago we made a statement that we will not increase the price of oil (for) the rest of the year," he said.

"At the same time we are studying very carefully and analysing how big is the negative impact it may have on the economy."

Record high of US$80

Crude oil prices are curently trading near record highs over tight US supplies and hurricane worries. New York's main contract, light sweet crude for October, rose to a record high of US$80.18 overnight.

Malaysian central bank governor, Zeti Akhtar Aziz, said the steep global oil prices will be monitored closely for their impact on the economy.

"However we have to take note that we are starting from a point where the inflation rate is very low and therefore we have the capacity to absorb the impact," she told reporters.

Inflation remains within the forecast of 2.0-2.5 percent for the year while interest rates at existing levels are still supportive of the economy, Zeti added.