Basically...it seems that we all like to criticised our government on every decision it makes...well,basically,government are a body which will always make these unpopular decision...but did we ever wonder why the government have to make all this very and i mean VERY 'Unpopular' decision?!
Its not they want to make these unpopular decision...its that they 'HAVE' to make these unpopular decision...
In light of this, let me explain why the government have to increase the price of petrol in this country. Basically, let me quote Idris Jala (CEO of Malaysia Airline) that the current oil price in the market are manipulated to this height of over $120
by irresponsible market speculator and 'nothing-at-hand' oil company ie. Enron. Basically to say,rm2.70 per liter is the current market price. The market price now is $116 per barrel and will rise further.*(as per 8.20pm local time) Rightly so, we are currently paying rm2.70 is accurate as to the current market price. Now, this is not a political decision as CLEARLY, an unpopular decision. This is an economic and strategic move by the government, a tough stand and UNPOPULAR, but needed to take in light of market price. If the government fails to act on this, it will result that the government subsidising rm0.78 per liter, its every litre that we pump into our cars. Imagine me as a consumer, been pumping 25-30 litre everytime, thats rm21 that the government helping me pay for everytime i pump petrol. Honestly, i love this way, prefer that the government is still subsidising for us. But its time to open our eyes, and look at a broader perspective, do you think that if the government keep on doing this, they can afford to fork out money for development of research for biodiesel, development of infrastructure in a sense of commercial production related and also also to give us Malaysian the services and infrastructure that we used? Although we are paying the government income tax and all, the subsequent revenue of crude oil we produce, are spend on our subsidy. So,with the ever increasing price of crude oil,the revenue we gain from 1st grade oil, may be not sufficient anymore to cover subsidy in our country, as the crude oil which we import is ever increasing in its price.
Now, why is this so as the increase of crude oil?
Only oil that has been found before can be produced. Therefore, the peak of discoveries
which took place a long time ago in the 1960s, will some day have to be followed by a peak
of production. After peak oil, the global availability of oil will decline year after year. There
are strong indications that world oil production is near peak.
'Crude Oil-The Supply Outlook'
EnergyWatchGroup.org
Indication had shown that in the 1960's discovery for crude oil was at its pinnacle or peak, mainly in Saudi Arabia as to the largest oil field. So it can be said that as now discovery of oil is going down, it will be a guessing game for when would production itself reach its peak and therefore the start for the era of crude oil production free fall. Therefore, its only time that the supply (production) will go down. Simple as this to put it, with the increase of demand and a decrease in supply, the basic principle of economics will tell you that the price of the product will increase. This increase doesn't truck our nation as individual but also a few oil-producing country, like Indonesia.
However, why is the increase of oil price effecting our country when we produce our own oil?
Argument can be made that why are we selling our country 1st grade oil and buying 2nd grade oil? Generally, it is through the profit that we sell our 1st grade oil which our government can take from to subsidise our petrol before the price increase on the 5th of May 2008. Now, generally speaking, let me re illiterate what happen during 1974 of the oil embargo. The Arab Nation choose to stop sells of their oil after they choose to stand against the United States. Now, the subsequent result was that the oil price in the world went sky high. This establish the very principle of supply and demand. Certainly, i can tell you that Malaysia is NOT IMMUNE from any global market effect. So is our position today even if we produce oil, which a matter of fact, not significant.
The question, isn't the fact that we produce our own oil should be able to lower the price of oil in our country?
Do not forget that we produce oil which has less sulfur content in it, with this makes our oil 1st grade, which we export and subsequently buy 2nd grade oil. With this, we are suppose to be able to get more money to buy these 2nd grade oil. The volume of these 1st grade oil is no longer as much as the amount of previous years. This is evidents as PETRONAS is now exploring oil itself in middle eastern country and other places if you kept up to date with PETRONAS projects down the years. To emphasise the decreasing volume of oil,
"Russian-oil production fell for the fourth straight month. The government is considering changing tax laws to encourage more activity, but the International Energy Agency believes that the proposal is insufficient. Russia recently passed a law that limits foreign investment in strategic oil and gas fields."
"Topic Report: May 2008"
Apache Corporation Report
Russia itself is a big oil-production player in the world market as in 2nd place in term with the Middle East. To give you a mathematical figure, they produce 154Gb of the world 854.4Gb oil reserve,18% of the world reserve. Now to give you an overview, the South East Asian country only produce 16.5Gb of the World Oil Reserve, an UNSIGNIFICANT 2%. You can imagine that Malaysia itself is not a significant oil producer and a minor oil-producing player in the global market as how timid is our production if its compare with Middle East that they have 42.3% of world oil reserve. Definitely this suggest to you that although we produce oil, we do not have the volume enough to independently to maintain supply as it is. Why do i say that we do not have the volume of oil anymore, which we all as Malaysian failed to see.
Is Malaysia still producing enough volume of oil?
Malaysia HAD pass its peak for oil-production. This is not a prediction but a fact. In the year 1997*, Malaysia had pass its peak on oil production. So with this, oil production in our country had been practically falling, not free falling, but decreasing which subsequently effecting supply in Malaysia as to even our 1st grade oil. We should be grateful as it was forecast that Thailand will only reach oil production peak in >2010*, Thailand had already been raising the price of oil as we speak. Yes, we are not the lowest price for oil in Asia. But if you contrast this 2 country, it is clearly establish that Malaysia had down the years substantiating its price with volume of oil we produce. Maybe it is now that the government can not longer substantiate this burden. With the decreasing supply through production in our country, it is inevitable that principle of demand and supply sets that price would increase in its effect.
*(information courtesy of:
Ludwig-Bölkow-SystemtechnikGmbH, 2007
Source: IHS 2006; PEMEX, petrobras ; NPD, DTI, ENS(Dk), NEB, RRC, US-EIA, January 2007
Forecast: LBST estimate, 25 January 2007)
Now, to this extend, PETRONAS on its revenue, to look at it OBJECTIVELY(saying of corruption etc),
"KUALA LUMPUR: Petronas will go bust within 10 years if all its profits are handed to the Government to continue subsidising fuel, said its president and chief executive officer Tan Sri Hassan Marican.
He warned that many national petroleum companies in the world have ceased to exist or were in financial trouble today because all their profits were taken away from them.
“Since the formation of Petronas in 1974 to last year, the company gave the Government RM335.7bil out of a total profit of RM570bil,” Hassan said.
'June 6 2008, The Star'
This is a news that practically tells you that all this money had been given to the government to subsidise, which in view of the increase in oil prices, it is no longer possible to subsidise. Income tax and other taxes respectively are use to pay for other development of this country as in infrastructure, education system and scholarship, public servant salaries and etc. It is not right to say that income tax should be use for subsidy. Furthermore, to maintain this level of currency exchange growth, it is vital that our money and gold reserve in our country maintain and that with using extra money to subsidise oil, our currency exchange will only result into its downfall.Therefore, it is not in our best interest that our money are going 'abroad'. This is why countries like the UK, USA and EURO are able to maintain a high currency exchange because they have the volume of reserve to keep them in the position they are in.
If we are taking away more of PETRONAS profit, this institution would not be able to explore more oil field and to operate as a company, therefore making our country more dependent on other foreign countries in oil supply.
Lastly, i would like to say that what on government lie on the oil hike.
"The fuel subsidy scheme to be announced Wednesday is a
step towards the total revamp of the subsidy that will take place in August, Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad said."
'June 3rd 2008,The Star'
Take the red highlighted word in its literal meaning, the increase was a step for the 'TOTAL REVAMP' which the total revamp would only occur in AUGUST.
However untimely that the increase and announcement of the price increase, it is not a lie rather than a bold but untimely move by the government as Datuk Shahrir clearly said that its 'A STEP' and not 'NOW' for the total revamp. Honestly its not a good news but a need.
I would like to say that im not a PRO government guy, but as a broad way of looking at this, it is not my best interest too for the oil hike as im a consumer too. However, in light of this, undeniably that we as Malaysian have to learn to bare with it, that its a global phenomena and not us Malaysian only.
As for the poor, it is in my view that the government although had raise the price, they need to take effective measure to help out the poor and the needy. This are steps which the government need to do in order to regain public trust as poor people and people's business who had relation with the usage of oil in some way, need to be given a helping hand by the GOVERNMENT. When i say this measures, it should not be a light calvary of help but rather HEAVY as this effects people in a big way. If subsidy cant be given out in the amount as the pre 5th of may 2008, give it to people who really need it and will be effected the worst in light of this oil hike.
