I am still brooding over the statement by our Malaysian government that because of the crude steep price increment, we can no longer afford to maintain the subsidised fuel at previous level, to do so will only mean we have to sacrifice development fund and failure to maintain the price of other essentials.
The whole picture is fuzzy, there is lack of transparency and there is no way we can debate and suggest to help otherwise.
However, I am still not convinced that our government is telling the truth.
Malaysia is a net exporter of crude oil, we use up less than what we produce and the surplus is exported.
In fact we exported our sweet crude at much higher price and imported the lower quality crude.
To say that we are subsidising the foreign oil company, like shell is also not true, in fact very naughty of Petronas chairman to even suggest.
Foreign companies buy crude from international market, in fact they are extending credit to the Malaysian government by selling petrol at below cost and have to wait for refund.
Why I say, we are advantaged by high crude price, let us take an example:
When the crude is at USD60 per barrel, our pump price is at Rm1.92, we had allocated budget for, say A amount for development and other subsidies for essentials.
Now with crude at Rm130 per barrel, the government said we can no longer can maintain our pump price at Rm1.92 and to do so we would incur B amount for the same development and other essentials.
Now, B is larger than A. So the government said we need to increase pump price so that A can be equal to B. Sounds logical.
But Malaysia is a net exporter of oil, say we have a net surplus in trade of X billions at crude price of USD60 per barrel and at higher crude price X will be larger. Agree?
Let’s say, there is a country in the middle-east, their only revenue is from oil and the rest of the other requirements are imported.
They produced just enough to meet their requirements and at crude price of USD60, they are able to meet their budget with their profit of X billions in crude export.
Now that the price of crude had gone up to USD130, is the Malaysia government telling us that this middle-east country won’t be able to meet their earlier budget and requirements?
If this is the case, why did this middle-east country want to increase his price of crude in the first place? And also, if this is beyond this middle-east country control, it would have to increase production just to survive but there is no sign of this in the world of crude oil production.
I don’t think our government is telling the truth, we should have more to enjoy and the pump price can be maintained if they wanted to.
This may be more of political move to win back support since the disastrous last election.
It will be despicable if this is what our government is doing, to disrupt our daily lives for political gains.
Another theory may be we are threatened to reduce subsidy by the developed countries, countries that are importing our cheap goods because their own production is not as competitive.
Their NGOs and governments had been accusing and pressurising us as perpetuators against ‘green world’, health problem products, labour exploitation, minimum wage, exchange rate manipulation, etc.
For all we know, it is their grand design, in manipulating the price of energy to overcome their disadvantage.
They may already have secret deals with major oil producing countries who guaranteed them certain volume of crude at a minimum price. The scene is played out by their speculators in the commodity market and they make no effort to control this speculation.
Is our government playing into their hands?
Yet again, the world economy is dangerously coupled with mineral oil as energy.
We need to de-couple it; we urgently need alternative sources of energy.
These sources are available everywhere and unexploited because we just take the easy way out.
As for Malaysia, palm oil may turn out to be our saviour in future. The government should give incentives to this development and not try to introduce deterrent, like windfall tax to stifle the industry.
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