One of the famous opposition claims in the recent campaign was their pledge of sorts of lower gas prices. I’ve been doing a little research about what they said and why they said that, but basically the argument is this:
“We promise to reduce the oil prices on March 9 if the opposition topples the Barisan Nasional (BN)”, said Anwar Ibrahim, while assuring everyone that the country would not go bankrupt if such a measure were to be taken. He stated the Petronas’s 80billion ringgit profit is more than enough to subsidize gas prices across the board and still have enough to cover free education and health care for the country.
The above has been one of the key campaign themes by the opposition. And one that I feel is where the key battleground will be 4 years from now. The differing oil policies suggested by the government and the opposition is not merely a difference in price-tag, but about the role of the federal government itself in the management of a country.
Here are some things to think about:
1) Petronas already subsidises a huge amount of money (30 - 40 billion) to the government and in turn to the rakyat to keep our fuel prices one of the lowest in the South East Asian (and the world) region. While it is technically true that Petronas is able to increase their subsidies by another 20 - 30%, one must not forget that Petronas is not the only oil and gas company in Malaysia. Petronas produces around 250,000 barrels of oil a day. Exxon Mobil, Shell, an ConocoPhillips also have refineries in Malaysia and contribute close to 50% of the fuel used in Malaysia. To have Petronas increase a subsidy is to indirectly suggest that they will be paying these foreign companies money to lower their fuel prices.
2) The question is should there be a sales tax, and let the global economy decide how much our fuel cost, or should the government continue to manage the gap. On this matter the government is slowly reducing their subsidies, which in the long run will mean that the rakyat will bear full burden of fuel costs.
3) The reduction of a subsidy will mean that the government will save a lot of money and can implement development and other national matters on a federal level. This also means that the rakyat will be responsible for their own usage of fuel. Responsibility to not waste will potentially increase, prices will surely increase, but hopefully, the market will move more with the government implementing other projects that will improve the local economy. These are ideals. Opposition will say that the federal government will use the money for something else, such as letting it go into their own pockets. So why not indirectly give it back to the rakyat through fuel subsidies?
The fundamental difference here is should the government take control of this matter, or should the government allow market forces and the people to take control of this matter? Both have its benefits and both have its soft sides. Anwar’s suggestion is to bringing the system under government to bless the people and at the same time increasing government control. The government’s position is a conservative one, allowing the people to carry their own weight.
(4) Think long term. Malaysia can only produce her own oil for another 20 years or less. With continued subsidy, that problem might be swept under the carpet, and that is a dangerous position to be in. There will come a time when fuel imports become our main source of energy, and that will be a price increase. I believe we have the responsibility to avoid a steep change when such a scenario take place.
Of course the other option, one that I am very in favor of, is the gradual conversion of petroleum based energy to bio-fuel energy. I have yet to fully do my research in this area, but if processed palm oil can produce enough energy for a lower cost for the whole nation, it is something that we should push very hard for. The world is not fully prepared for such a drastic change, but it is something that we must think about. For Malaysia it is an especially important decision to make. We are ranked in the top 30 of oil producers, and for now our oil industry are heavy revenue generators. But some time down the road these companies are going to produce less, and the subsidies will decrease. Prices will increase eventually. It’s inevitable.
As I have suggested, the best way to solve this is to avert the problem entirely. But as always, it’s more complicated than that.
So, how can the opposition get hit for this 4 years from now?
(a) Block oil price hikes, which will lead to decreased federal funds, and in a worse case scenario, severely deplete our national finances to do anything else. In such a scenario, who is to blame?
(b) Allow price hikes, which will lead many rakyat to hold their necks accountable, and pointing out that one key promise was not met. In such a scenario, who is to blame?
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Plus Anwar never specified if he would decrease fuel prices by 1 cent of 10 cents.
Since the opposition did not manage to form a new national government, this issue will be one that bounces back and forth without end. Both solutions will anger the rakyat, in short term bursts or long term explosions.
Consider.
Links:
Malaysiakini’s article about how much the opposition has a lot to live up to…
superratty
This is a good topic and should be seen by more Malaysians. Ping PPS more… =)
I too have always held the opinion that Malaysia as an economy cannot afford to have an indefinite subsidy plan. Our economical well being will be better served in the long run if a policy is sent in place for a gradual reductions of subsidised oil and gas.
Moreover this will have a to go hand in hand with a viable option of first ensuring that the cost of living of the average Malaysian are first increased to a healthier level than it’s currently at right now.
As far as Anwars promises to the people, I’m thinking that in hindsight it was a matter that was easy for him to say while campaigning, todays reality is something all together different. Still I vote for change and change is what we got, so I’m standing by my decision.
As for bio-fuel,l not that I am an expert in the field, but it is from my understanding that bio-fuel is actually 95% oil and 5% vegetable oil (Palm Oil). So right now the expected savings from utilizing bio-fuel is not that much. Still there is much hope for the bio-fuel to be further developed for mass usage.
Sorry I do not agree with the subsidizing of fuel. We are in fact subsidizing our neighbors. Please do a more accurate study before using the Petronas gains or any funds in subsidizing the fuel. There should be a better way where we will not be paying from our hard earn money for our neighbors.
Bio fuel as in Bio Diesel is a joke. only 5% is palm oil. What is this 5% compare to the US$100+ per barrel? I personally think the cost in perusing this is costing more than it’s benefit.
So in my 2cts, open the petrol market. in turn, add a small tax to it. Then subsidize the income of the people by reducing tax.. this can be income tax, more personnel relief, abolish sales tax, reduce road tax for commercial vehicles..and many more.
Mydeen thinks this is an excellent idea. In fact, we at the Siber Party of Malaysia (M) have been suggesting this for a long time. The money used for subsidies should be used to improve public transportation, allowing motorists to pay for fuel loser to market prices. Hopefully, this will decrease the number of cars on the road, leading to lower traffic and congestion.