Fuel Price - Are We Getting A Fair Deal?

As you read this article, you would have probably already paid the new price for petrol for your vehicles for the first time after the latest increase by the Government. My guess is, you paid RM110-RM130 for a full tank of fuel when it used to cost RM70-90, depending on what car you drive.

It is understandable that the people are upset with the latest hike. This comes during very challenging times as many are trying to grapple with the spiralling prices of essential items. Irregardless of whether you own a vehicle or not, the increase of petrol and diesel prices, let alone at such a quantum, will have an impact on your life some way or another. Life is such these days that the world is in its prime of addiction to oil. This phenomenon trancends beyond boundaries and knows no racial and religious discrimination. In other words - everyone is affected. Mankind and humanity itself is threatened.

It is hard to imagine how our friends in the lower income group will cope with the current situation when even the middle income group are beginning to feel the heat. For these group of our fellow Malaysians, changing of lifestyle is not an option as their only goal is to make sure there is enough to feed the family and to have a secure place to stay. Maslow described these as essential needs (a.k.a. keperluan asas) of every human and even basic needs now come at a premium.

Yes, there is no doubt this is a global phenomenon. From factors such as climatic changes to market speculation, prices of commodities have risen to unprecedented levels. In challenging times such as these, it is difficult to phathom the reasons why a country blessed with natural resouces would struggle to cope with the prevailing world order.

Malaysia - the Top 20 trading nation in the world is a nett exporter of petroleum (a.k.a black gold) and other much sought after commodities today such as palm oil, tin, natural gas, timber and more. The current high prices for commodities should favour countries like Malaysia as increased prices translates to increased revenue injected into the local economy.

It would not be unrealistic to say that Malaysia is one of the fortunate countries to gain from the inflated prices of world petrol prices. If you sell something more than you buy them, you will stand to gain if the price is higher. Its simple economics. There are no 2 ways about it. Petronas' profit of RM80 Billion is a testament to this belief.

Of course, it is common knowledge that petroleum is an ever depleting, non-renewable natural resource. The more you pump, the quicker it will finish. It is true that there will come a day when the country will be a nett importer of fuel. That will happen soon according to the Government, in 2014.

That is the future but as of now, the fact remains that the higher the international price of fuel goes, the more it benefits our country. In other words, despite the increase in subsidy for fuel at the pumps, the higher revenue derived from us exporting the "black gold" is overwhelmingly in our favour. Using a hyphothetical figues, the subsidy may be RM 7 Billion in 2006 but the surplus (profits from export minus subsidy) may only be RM5 Billion when prices are relative lower. In 2008, the subsidy may be RM28 Billion (figures may vary depending which minister you listen to) but the surplus will far exceed the RM5 Billion in 2006. To translate it to English, it would simply mean that it was actually a heavier burden for the Government to subsidise us back then compared to now.

Justifiably, some of us may say that we should think of the future generations and not being selfish and use up all the natural resources in our time. If this was the noble idea all these while, we should've extracted less fuel from our shores when the price of petroleum was at its lows in the mid-90s so that there will be more for us to pump out when the prices are high - like now.

If we were foresighted enough, we would also have had a stockpile plan back then to better manage the movements of this commodity. We would've imported more than we sell when prices were low and do the exact opposite when the prices are high. This way, we would have achieved maximum returns from the ever limited and depleting petroleum resources that we are blessed with.

We can't help but ponder if such mechanisms were in place, perhaps our oil would've lasted us till 2050 and beyond. Having oil is a trump card. If only we manage our resources correctly, it will benefit the nation irregardless whether oil is cheap or expensive in the world market.

While it is good to think of leaving whatever that is left for the future generations, it is worthwhile to note that what happens in the future is inevitably shaped by what is happening today. For the future to be brighter, we should and must weather these challenging moments together - people and Government.

There is no doubt the Government can afford maintaining low domestic petrol prices and avoid Malaysia falling into spralling inflation, economic depression and abscurity. There will still be more than sufficient left for nation building, development programmes, community programmes and savings.

Comparing our pump prices to those of non-exporting coutries like Thailand and Singapore will not help. Comparing our pump prices with developed countries with high per capita income is not a fair assessment. Comparing us with Indonesia, a nett importer of oil with 10x our population, makes our situation look pitiful.

A fair gauge would be to compare Malaysia with similarly fortunate nations like Venezuela, Nigeria and even our neighbour Brunei. If these developing and 3rd world countries blessed with oil can do it, Malaysia should not be the odd exception.

If artificially lower pump prices for diesel and petrol distorts the true state of our economy (as claimed by economists and analysts), then the government should also allow for market prices for imported cars and truly opening up the economy. Everything will be done according to market forces under the spirit of free trade with total dismantling of trade and non-trade barriers, discriminatory practices and monopolies in certain industries.

With the excise duties that Malaysians pay for the vehicles they buy, the Government should have sufficient revenue (not to mention profits from oil exports) to provide subsidies. Essentially, the vehicle owners have paid for the "subsidies" in advance - an amount that should be sufficient to cover the mileage used during the entire lifespan of an average car.

This source of revenue coupled with earnings from oil exports other taxes make it difficult for Malaysians to understand the need to increase the pump prices. Needless to say, the price of essential consumer products will increase due to higher logistics cost. Goods must travel the entire supply chain before reaching the end user. Goods don't simply walk into the supermarkets, they are sent there by vehicles consuming diesel. Normally, after prices go up, they never come down.

This does not yet include the impact of electricity costs come July, which will affect the cost of production of goods. It is going to be very painful for many when the full impact is felt.

Those who have ears, let them hear!!!
Those how have eyes, let them see !!!