Posted: 07 Sep 2013 01:35 PM PDT
In Malaysia, it's generally true that vehicles used for business purposes run on diesel, and petrol is used for private motoring.
This week the Government of Malaysia reduced the subsidy on RON95 petrol and diesel by 20 sen per litre; 2 days later the government reduced the subsidy on RON97 petrol by 0.15 sen per litre.
The price-at-the-pump is now RM 2.10 for RON95, RM 2.00 for diesel; and RM 2.85 for RON97.
The news analyses and comments I've seen in response to the increases are mostly negative.
We've been reminded that in February the Prime Minister said fuel prices will not be raised, and in April, the Minister for Domestic Trade said the same thing. The PM and the Minister said the government would continue to subsidize fuel at pumps, despite the fact that the cost of subsidies is, according to one news report, RM 30 billion per year. So, we're to conclude "the election's over, time to break the promises." Sigh.
We've been told about inane comments by BN politicians, e.g. Bung Mokhtar, saying the increase in prices will not burden "kampung people." Sigh.
We've been shown a few photos taken at petrol stations which show some who queued to grab the "cheaper fuel" before the midnight price hike were driving large new cars. So, we're to conclude the poor aren't complaining, it's just the rich who're complaining. Sigh.
We've been reminded that the Fitch ratings agency pushed our nation's credit rating outlook to negative, due to over-spending by the government, including "high and rising weight of subsidies in expenditure," as reported in The Malaysian Insider. Some take this to mean we should conclude prices at the pump must be raised in order to please foreigners! Sigh.
I've just returned to Kuala Lumpur after living for a year in the Netherlands. I know how cheap fuel is in Malaysia relative to other countries.
For a litre of RON95, last week, in Amsterdam, I paid RM 8.01 (EUR 1.85), while this week in Kuala Lumpur, after the price hike, I paid RM 2.10. The Dutch pay 4 times as much as Malaysians! [I should also add that the Dutch do not pay tolls.] This source gives you the price of fuel in Europe.
I am NOT surprised by this report on the extent of Malaysia's fuel subsidies:
"In 2011, the IEA [International Energy Agency] reviewed the consumer subsidies of 12 economies in the Asia–Pacific Economic Cooperation (APEC) forum, which together represented roughly a quarter of global subsidies. On a per-capita basis, Malaysia had the third-highest fossil-fuel subsidies, spending US$199.6 per person in2009, behind Brunei at US$804.1 and Russia at US$274.3 (IEA, 2011). The study also indicated that Malaysia spent 2.4 percent of GDP on fossil-fuel subsidies, just behind Vietnam, with the highest Expenditure by GDP at 2.8 percent." (source: the Canada based International Institute for Sustainable Development)
When I reviewed news reports and comments, I noticed the reduction of subsidies and the subsequent increase in price-at-the-pump is being 'analyzed' in overly simplistic terms. We seem to gravitate towards us-versus-them, 2-dimensional slanging matches, and miss the big picture.
Odd. Few seem to think fuel consumption will go down as a result of the price increase. Isn't it odd that an increase in price doesn't translate to a reduction in demand?
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