Quantum leap in Fuel Price

Malaysia is an oil producing country too. A brief info below shows our petrol price is the highest among other OIL PRODUCING countries

MALAYSIA- RM2.70/litre
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

A simple explanation from Tun Dr. Mahathir, extracted from his http://www.chedet.com/ blog ....

"Can the Government subsidise? I am the “adviser” to Petronas but I know very little about it beyond what is published in its accounts. What I do know may not be very accurate but should be sufficient for me to draw certain conclusions.

Roughly Malaysia produces 650,000 barrels of crude per day. We consume 400,000 barrels leaving 250,000 barrels to be exported.

Three years ago the selling price of crude was about USD30 per barrel. Today it is USD130 – an increase of USD100. There is hardly any increase in the production cost so that the extra USD100 can be considered as pure profit.

Our 250,000 barrels of export should earn us 250,000 x 100 x 365 x 3 = RM27,375,000,000 (twenty seven billion Ringgit).

But Petronas made a profit of well over RM70 billion, all of which belong to the Government.

By all accounts the Government is flushed with money.

But besides petrol the prices of palm oil, rubber and tin have also increased by about 400 per cent. Plantation companies and banks now earn as much as RM3 billion in profits each. Taxes paid by them must have also increased greatly.

I feel sure that maintaining the subsidy and gradually decreasing it would not hurt the Government finances.

In the medium term ways and means must be found to reduce wasteful consumption and increase income. We may not be able to fix the minimum wage at a high level but certainly we can improve the minimum wage."

What Tun said makes sense. He is more practical and really cares. I am certain that if he is still PM, he would have done what he had mentioned earlier.

I feel, the Government should have adopted a more prudent approach, that is, "if the Government have to increase the price, a little price increase is not out of order or step by step (or stagger) increase the price which was done a few years ago" based on Tun's analysis of the number of barrels of crude oil per day produced and consumed.

The Government should have given sufficient notice to inform the Rakyat early and indicate the time frame to move to the equilibrium market price. This way, the Rakyat can prepare to face the reality by finding a solution to overcome and lessen the burden, example buying a smaller cc or litre car, plan out their journey using the public transport or even fit their cars with gas cylinder as an alternative to overcome the high petrol price which had jump to RM2.70/litre from RM1.92/litre effective today.

Seriously, where have all our smart Economist gone to? I really would like to know who is our Prime Minister's advisers who had given him this radical approach - the sudden quantum leap of the fuel price. I am sure the Rakyat are truly disappointed today with this move. What Tun said here is right too,

"I believe the people expect the increase of petrol price. But what they are angry about is the quantum and the suddenness. The Prime Minister was hinting at August but suddenly it came two months earlier, just after the ban on sale of petrol to foreigners. If the increase had been more gradual, the people would not feel it so much. But of course this means that the Government would have to subsidise, though to a decreasing extent".

This is not an advertisement column for Tun's blog, anyway feel free to visit his blog http://www.chedet.com/ for more positive comments from our Rakyat who had written in to thank him for his rational thinking and approach to the oil price. This is what the Rakyat wants.