Thursday, June 05, 2008

Higher fuel price - nasty tasting but necessary medicine

Oil or its more refined form, fuel!

That’s the now-talk in town, and hardly surprising so, because the government has partially reduced the subsidy. Bear this in mind please, the fuel at RM 2.70 per litre is STILL highly subsidized, where the true price per litre is more at RM 5.00 ..... that is, RM 5.00 for now as we may expect it to rise even further

The Malaysian government will have a torrid time playing catch up but … more later on the government’s action.

The pain for the ordinary bloke is considerable because what should have been done earlier, years, nay, a decade or so ago, was not. The government had allowed for too long an unrealistic extremely low fuel price so much so that when the necessity to remove this hefty chunk of unaffordable and inefficient expenditure from our national budget became an imperative, the effect (real and perceived) of the abrupt implementation invariably becomes tsunamic.

Didn’t Edward Young once say: “Procrastination is the thief of time”?

So everyone from Dr M to the great Anwar Ibrahim to Lim GE have either condemned or at best, criticized the government’s decision. In Malaysiakini Anwar Ibrahim, a former Finance Minister, predictably groaned Hike ‘wanton in size, callous in effect’.

But both Dr M and Anwar Ibrahim must share the responsibility of having the fuel subsidy in the first place, and allowing that to continue for years. It should have been gradually removed a dozen years ago.

Then, we mustn’t forget that Anwar had irresponsibly made an election campaign promise of lowering, yes bloody lowering the fuel price, let alone (impossibly) maintaining it at RM 1.92.

Malaysiakini reported: “… writing on the price hike in his
blog, Anwar reiterated his personal as well as Pakatan's stand that the oil price will be reduced when they come to power. The promise to reduce oil prices was one which Pakatan capitalised during the general election.”

I highlight this to show two things, firstly, don’t believe everything Anwar promised or promises, and secondly, if he had really intended to lower the fuel rpice, we should also remember he was a lousy Finance Minister. Read this to see how he performed when he was Finance Minister.

Much as I am currently a DAP supporter, on this issue I find myself supporting the government in its (only partial) removal of the subsidy. At long last, finally!

As I stated earlier, the Malaysian government will have a torrid time playing catch up in its effort to remove the subsidy completely because the oil price continues to rise. But at least it has started something that should have been done eons ago. Still, better late than never.

But I want to know more details of what it has planned to mitigate the adverse economic effects on the poorer members of the rakyat. For example, Lim GE told Malaysiakini that “… the increase would punish the poor if rich companies continue to enjoy fuel subsidies especially the independent power producers."

The subsidized scheme was an inefficient system which had lent itself to cheating and benefitting only the big players. It was inequitable and thus had failed to play its role as a subsidy for the people’s benefit. If AAB still allows the big players to somehow benefit from his proposed mitigation scheme (details yet to be known), I’ll be pretty pissed off. Everyone must bear the pain together, especially the members of our society (corporate or private) who can afford it most.

As I had posted in an earlier article, the increased fuel price per se won’t dramatically affect the pockets of those with small engined vehicles, but I am worried about the downstream effect on essential goods, as transportation cost will definitely leap. And it won't do any good for the government to come out with its usual silly threats to force-control prices of essential goods, as price control and subsidization have been what got us into trouble in the first place.

One immediate relief is to dispense with road tax for small engined vehicles, ameliorate the insurance cost through a public insurance scheme, and various other fees that directly affect the poorer public members. The public transport system must be improved – in this area, the government must not allow creative concepts from the private sectors to be shackled by the CVLB or the constraints of the NEP.

Then there is that controversial issue - nuclear power! The government must seriously consider this option, and not leave it till, again, too late.

Yes, removal of the fuel subsidy had to be done, it has now been partially done, there’s more to be done – and it’s the good government which can come up with a sound equitable mitigating scheme instead of just cheap grandstanding unconstructive and provocative criticisms based on sheer bullsh*t.


Related:
(1) Fuel subsidy - who really benefits?
(2) Tony Pua, what say you on PKR's increased fuel subsidy?
(3) Oil & its cost - What to do about it?
(4) Fuel Price Increase - Blessing or Burden?

24 comments:

  1. All the blame should go to Mahatail. He encourages Malaysians to have cars and build more tolls to suck blood from us. Now if the Tolls are not making money, do we still have to fork out for them when they cried they are not getting enough? Also instead of petrol subsidising, BN should build more LRTs, Trains and promote public transport under the Government like in Hong Kong, UK and Australia.
    Now malaysians found themselves in poverty because of this Mahatail

    ReplyDelete
  2. Really strange post you have here.

    A large part of Malaysia is groaning from the price hike (which even an 18-year old would know how to propose) and the lousy PM is empty of ideas on how to mitigate the inflationary impact.

    Yet most of your post is actually a vehicle to criticise your usual favourite target.

    ReplyDelete
  3. I feel sorry for those who is leaving under poverty line. They are the one that will suffer.

    ReplyDelete
  4. If Malaysian buying power are on par with Singaporean, it is NOT a problem, even the petrol are charing RM8.00 per liter.

    Now the best part is, North and South of Malaysia, Thailand and Singapore are able to keep the food price within affordable range, without fuel subsidies, one with strong agriculture and another with strong currencies.

    And Malaysia has NEP to cripple the countries efficiency to do it.

    Apparently, the country money has vanish in bigger black hole than we can realise.

    ReplyDelete
  5. Can the govt. allow cars to be sold at market prices too? Stupid to compare our petrol prices with other countries when cars are much cheaper there. Please lah, compare their earning power, their better public transport systems, their lack of wastages/leakages, their oil exporting capability etc.

    ReplyDelete
  6. Hei brother, It's not RM 5.00 but just RM 3.00. Get your facts right man! Anyway we're a net oil exporting country so our petrol price should be compared with those of oil exporting countries. It's not subsidy at all. It's all about proper country management.

    ReplyDelete
  7. Anwar Ibrahim has made a mistake on his blog. Lower oil prices is not a Pakatan Rakyat promise, it is a PKR/PAS promise. DAP is generally in agreement with the government's move, calling it "necessary".

    This is consistent with the position expressed by DAP in their 2008 shadow budget.

    Harap maklum. And may God have mercy on all our souls.

    But hey, with oil this dear, even hell must be a bit cooler now.

    ReplyDelete
  8. Dear Ktemoc

    I do not know if you are an Economist, but if a lie is repeated often enough, many will eventually come to beieve that it is the Gospel truth. And the oil price subsidy issue belongs right up there.

    Governments everywhere subsidise everything from Education, Health & Welfare, Defence, Space Exploration, the NEP, over-staffed Civil Service, etc etc

    Petronas, which itself is hugely over-staffed, subidises everything from MAS, Bus Companies(Prasarna)and IPP's to the MPO.

    Had our Govt removed the subsidies earlier, in stages, none have the assurance that BN would not have frittered it all away on some other junkets as PKZ, Floating Mosque, Monsoon Cup, Putrajaya, Cyberjaya, KLCC, KL Tower. How many billions is that? And, the fat lady hasn't stopped singing yet!

    Unrecovered MARA, Entrepreneurial and Govt study Loans alone total many more billions. Add in Scorpene Subs, Sukhoi Jets, NS @ $600 million per year that we don't need and you get an idea of how profligate the Govt has been with our money.

    Had the BN Govt been less wasteful over the last 50 years, M'sia, as an oil producer & a net exporter, could have absorbed all the oil price hikes without now having to resort to desperate measures and burdening the masses.

    How is it that S'pore, which has no oil-fields and among the world's highest cost of living, has been able to ride the oil storm, while we are at panic stations.

    The real problem is the grandiose 'Development' Budget of BN for unwanted 2nd Penang Bridge, more toll roads and the leakage from the systems of billions of $ in the form of Naked Corruption. The oil hike is to maintain this Budget and not for the operating expenses of running a Govt.

    It is still not too late, but we can only recover by voting out the looters. We have to take the risk that DSAI is a reformed character. At least, he's making all the right noises.

    I, for one, would not trust Firaun or Rip Van Winkle, any further than I could toss them!!

    ReplyDelete
  9. hi kittykat46
    you are spot on with your analysis ! Very obviously our Mr Ktemoc has once again in his own vested agenda write the way he does, much like a fake statistician out to defraud the unsuspecting and the naive..

    Facts and figures ( so called ) will be intelligently red-herringly propagated to arrive at his devious forgone conclusion and in this case he has as usual left out pertinent substantial relevant points of arguments which is simply , are we comparing like with like ?
    Malaysia is a net exporter of oil for god's sake !

    ReplyDelete
  10. Sounds like a classic UMNO ass-licker. As for Anwar, condemn him if he does head the Fed Govt and doesn't fulfill his promise to reduce the petrol price. Until then, just admit you are just another UMNO slave.

    ReplyDelete
  11. I think the Government is trying to do the best it can under the circumstances. I think the payment or rebate by size of motor vehicle is sensible and probably more egalitarian than across the board subsidy though I wonder how much administrative additional work is involved? I can see that the RIMV have a lot of capacity now that they are very computerized and do have quite an efficient system. However, does getting them to undertake this additional job - are they going to ask for more allowances, more compensation?

    My macro and micro economics is a little rusty. Although I tend to agree with PR's AI and WA about comparing the price of fuel with oil producing countries than with non oil producing countries, my question would be, are their - these oil producing countries - oil reserves expected to be fully depleted soon?

    If Malaysia's oil reserves are expected to be depleted within, say 5 years, then I would think that those managing the country should have linked the fuel subsidies linked to the price of oil and reserves depletion rate much earlier, probably during Mr Mahathir's time. If it had started then, the synchronising of the amount of subsidy to be removed with the depletion rate & increasing oil prices, would have been more gradual, such that by the time the oil reserves are totally depleted, the removal of fuel subsidy would be 100%.

    I surmise the rate of depletion of Malaysia's oil & gas reserves, is more serious than anyone realise and the little time left may be one reason what's causing the Hon. Mr Badawi's decision to bring the pump price to market, save for the rebates at a later date.

    The scheme appears well thought out. Quite egalitarian except for the part of selling to fishermen and farmers at RM 1.43 per litre. Too much room for abuses there by the "guardians" and "Gate-keepers"!

    Nonetheless, the intention to remove all the subsidy within a short period, may be too drastic and may not fully appreciate, as righly pointed out by the honourable gentlemen from Pakatan Rakyat, that Malaysia is a oil & gas producing country. That is assuming the depletion of the oil and gas reserves are not that srious.

    I surmise there are too many hands dipping into the Petronas's profits. Personally, I'd be interested to know who has been profiting the most from the oil bonanza. I would certainly like to see the accounts of Petronas being tabled before the PAC and to the public.

    I also think that we are in for a horrid time as unscrupulous traders - big or small - will capitalize on this by rising their prices so as to maintain a "decent standard of living" for themselves; Bugger all those b*@&%sh*t about their operational costs increasing!

    This price increase just might about cost a spiral in inflation due to such perceptions and fears. Everyone next will be asking for a salary increase. And we are all in for trouble. One Ringgit may become 0.0001 SGD!!

    The inflation spiral first started when Mr a*%!eh*#e Mahathir, in the midst of a financial crisis, made two major salary adjustments and one salary increase within the period 2000 to 2002. And not only that, adjusting the salary scales to private sector levels!!

    Talk about perverting Max Weber and Public Administration rules!! This man just about perverted everything tht was proper into a bloody mess! See if the current and coming inflationary spiral is not linked to him!!

    Sorry, I did not intended to link this subject to that "menace" but unfortunately, logic and memory just took over! Economists will know what this is all about.

    ReplyDelete
  12. Dear Old Timer

    I think many like you never read economic info closely. Petronas has always maintained that our oil reserves will probably last till 2025.

    This talk of oil running out soon is bullshit. Just befor GE 2008, Forexloosecannon Robokop R2D2DFM, that criminal who was sacked from Bank Negara in the '90's for gambling and literally losing billions of our money in the US$ speculative currency market, said that M'sia may become a net importer of oil by 2011. He has never substantiated how he arrived at this conclusion.

    Note that all's also gone quiet about Forexloosecannon's pre-election claim that our per capita income grew by an unbelievably stupendous 40% in 4 years, making it the nation with the highest growth in the world. More than China's or India's growth.

    Please don't fall for this BN spin. The leakage from our reserves is largely due to corruption and poor, poor mismanagement of titanic proportions.

    We have to make sure the don't get get voted in again to bankrupt M'sia once and for all!!

    ReplyDelete
  13. I believe the PETROL price increase is only the beginning.

    Based on our ex-PM track record of spending billions and billions on mega-projects, some good, some not so good, some completed, some not completed; the bottom-line SOMEBODY has to pay.

    And usually it will be us, the ordinary people. It will come to us as increased prices, or increased bank interest rates. So let us wait to see what those increases are and talk-talk and talk-talk and talk-talk about it.

    ReplyDelete
  14. Forexloosecannon Robokop R2D2DFM = Second Minister of Finance mamak Nor Yacob?

    ReplyDelete
  15. Oh don't be silly! Do you really believe that it was NECESSARY for the government to increase the fuel price when it makes so much more from Petronas revenues???

    We are not as advanced as Singapore, India and the other countries to be able to cope with the price hike.

    ReplyDelete
  16. Dear Ktemoc and others

    Perhaps you would like to take a look at Chapter 12 of the following (written by me)?

    http://phuakl.tripod.com/Lulu_book_50_years.pdf


    Phua Kai Lit

    ReplyDelete
  17. Oh yeah, that's just it. While Ktemoc cycles around Perth/Brisbane or whatever OZ rathole (no fuel needed!), the best commentary he could give was Anwar is useless. As if he needs the fuel price increment event to say that favourite phrase of his.

    Oh yeah, before i forget, i must be those cybertrooper rite?
    S@^*w u very much man!!

    PukTemoc

    ReplyDelete
  18. Mr Phua
    TQ for your freeware. You forgot that most Malaysians dun read do good manuals. they only love sensationalism !

    anyway , isn't your dos and don'ts covered in school curriculas up to tertiary level ?

    or are you saying all our current education is nuts and hollows ?

    just wondering

    ReplyDelete
  19. Donplaypuks, well said.

    The way we waste money is just phenomenal. We need to learn from Singapore on good governance and a host of issues like battling corruption, leakages etc. Dont be surprised many of the decision makers in this tiny red dot were once Malaysians.

    K "Swee"T emoc, go on and bash Anwar Ibrahim some more lah. Enjoy yourself!!

    ReplyDelete
  20. Ever wonder why these oil exporters do not charge their people world market prices for their petrol?

    UAE– RM1.19/litre
    Eygpt– RM1.03/litre
    Bahrain– RM0.87/litre
    Qatar– RM0.68/litre
    Kuwait– RM0.67/litre
    Saudi Arabia– RM0.38/litre
    Iran– RM0.35/litre
    Nigeria– RM0.32/litre
    Turkmenistan– RM0.25/litre
    Venezuela– RM0.16/litre

    ReplyDelete
  21. Dear "Anonymous"

    Thanks for your comments.

    "TQ for your freeware. You forgot that most Malaysians dun read do good manuals. they only love sensationalism !"

    My opinion is that you are under-rating most Malaysians. Recent election results demonstrate this.


    "anyway , isn't your dos and don'ts covered in school curriculas up to tertiary level ?"

    Perhaps. I've been out of school for quite a while and haven't checked in-depth lately. But what I have seen in one of the school books of my relatives made my eyebrows shoot way up.

    "or are you saying all our current education is nuts and hollows ?"

    You can ask people who interview
    job applicants regularly (for a living) and get their opinions. How do the products from the various universities (both local and overseas) compare and whom would they hire?

    Your thoughtful comments on Chapter 12 of my freeware are what I am soliciting.

    If we want change in Malaysia, we have to go beyond criticism and propose solutions.

    Regards

    Phua Kai Lit

    ReplyDelete
  22. Currently Adapting1:41 pm, June 06, 2008

    Yes, this subsidy thingy should be removed many-many years ago when Mahathir and Anwar were still in UMNO.

    I think the rich people enjoy the subsidized oil more than the average and even the poor one who don't even have a car.

    Perhaps, the money should be use to make sure the education and health sector maintain cheap and improve the facilities. This is more important to the average rakyat.

    Maybe the price hike will hurt me but I don't want to share the subsidized price with the those who can afford either.

    ReplyDelete
  23. There's some interesting and intelligent postings on RPK's "Back to basics: 1968-2008" article at Malaysia-Today.net.

    Itseems to confirm what I have long suspected, and what the Hon. Mr Badawi and his good men have indicated - albeit discretely - that Mr a*%!eh*#e Mahathir has BANKRUPTED the country during his 22 years of misrule. Leaving all the s&$%t for Mr Badawi and his Co. to clean up!!

    ReplyDelete
  24. That mad man Mahathir should be renamed "Mugabe Mahathir"!!

    Our inability to deal with the oil price spikes is because we have no more money left. No reserves!

    HE knows it, that's why he keep saying Petronas still have enough money! A guilty mind and guilty conscience manifesting itself through the mad man's mouth!

    When the inflation really hits, it would be great to see mass demonstrations in front of his house.

    A miilion hits on his website? Bah! Most likely hits by paid or sycophantic followers!

    ReplyDelete