Oil & its cost - What to do about it?

A letter to Malaysiakini authored by ‘Ken’ gave an excellent analogy of Petronas and the oil assets of Malaysia – I admire its message but I’ll come to this in a while. On the oil price rise, I have witnessed see two sides of Malaysian society reacting to it differently, predictably.

We have on one side, very understandably very angry people, consumers like KTemoc. However, I believe one cannot stop the inevitable oil price rise. The world oil market ensures that.

Furthermore, how many litres does the average household use per car per month? I'll be generous and say 150 litres - if I am wrong please let me know. That works out to RM45 per month or RM12.50 per week, roughly. If you can afford two cars you can afford the extra RM90.

Add on to this a 2% to 5% increase in household expenses. Any increase is damn annoying and unwelcomed, but it's not yet the end of the world. The poorer sector will of course feel a greater pinch with the increase in household expenses.

On the other side, a worried government goes about assuring the people that the expected general price rise in concert with fuel price won’t occur immediately or too drastically. The Minister for domestic trade has been going around threatening food stall owners and whoever he can find to keep prices the same or at most by a 0.1% rise, in a PR show of control and assurance by the government.

But nevertheless prices will rise all around because oil price does affect prices of other goods. Let's face it, no trader will absorb additional expenses that has been imposed on his/her business. There's no such thing as altruism in business. The profit margin has to be maintained, or the business person might as well pack up and go home as he/she would be one lousy business person.

The minister can (pretend to) scream and threaten for all he wants, but the moment he is out of sight, the price of items will go up - some admittedly unfairly, but most generally an inevitablity. Soon everyone will become used to the prices and accept them as 'normal'. Then the minister will stop his sandiwara (theatrics) and move on to other political grounds.

But the mass protest (in large part galvanised by political opposition) and the general public anger have more to do with the government's absymal record of fiscal prudence, unfettered & unjustified mega-project spending a la the late Soekarno, and dipping into the public purse to financially buttress ailing businesses of political cronies [eg. Renong, Bank Bumiputra x 3, MAS (and perhaps again), etc].

Some people are querying the Petronas assets gained from oil sales – hundreds of billions [where are they?], in response to Petronas warning that Malaysia could well turn into an importer of fuel in the future.

Both sides are right.

There is no doubt that billions and billions of ringgit have been thrown after bad ones, under the mega-project era and the general poor governance of public assets and crony-bailouts. These have been what have riled the public, for when they see a political buddy of the establishment bailed out by the billions while they are forced to pay for 30 sens per litre of oil, they feel they are victims of an immense government injustice.

The insistence on carrying on with the ‘broken bridge’ and the rotten award of the PORR contract are examples of profligate spending at a time of belt tightening. It's obvious who have to tighten their belts.

But leaving aside all the anger over the government's bad record, fuel subsidy has to stop one way or another. The nation cannot afford the cost. Even DAP's Lim Guan Eng accepts the removal of oil subsidy.

Coming to the Malaysiakini letter written by Ken, I am afraid that while his letter is fantastic, I don’t agree to such assets [what’s left of them] being used to continue subsidizing public consumption. I am more interested to see the assets being used to build good infrastructure that will benefit the general Malaysian public and our future generations.

Having said that, I want to see the government also tighten its own belt. It’s not just stopping the mega-projects but the crony-award system must be stopped to ensure that the public may derive the best value for any public development. Issues like the Metramac or PORR case must not occur again.

PM Badawi’s promise to improve transport infrastructure must be made good, not only from the de-subsidized savings but also from the general funds from oil sales. But more must be done with the wealth from oil, such as education, health, a fantastic library system that we can all benefit from and be proud of, public communication, protection of our environment, research & development, disaster control and amelioration, improved and guaranteed basic infrastructure such as electricity, water, sewerage, flood control, and public facilities.

There's one more thing that can be established from the oil assets, which some readers may object to strongly. But I am going to propose it anyway – it’s time we think about nuclear energy. It will cost more than a few ringgit. Our electrical infrastructure has fallen behind our consumption, and we need not just to keep up but to leapfrog ahead. Industry needs energy; so does our everyday life. Trains [in lieu of excessive private car travelling] can be powered by clean N-electricty. N-power plants will also relieve our dependency on oil.

Nuclear power is like fire to mankind - a bad master but also a good servant! Use the oil money to invest in N-energy now!