Friday April 25, 2008

Subsidy on diesel to go first, says Shahrir

By TEH ENG HOCK

KUALA LUMPUR: The restructured fuel subsidy scheme will see the removal of subsidy on diesel first.

Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said diesel would soon be sold at the market rate at the pumps when a mechanism to deliver subsidies directly to those entitled has been decided upon.

“We are looking at diesel first, and how to ensure that subsidised diesel gets to the right groups, especially to the transport sector and (those involved in) certain economic activities which require diesel subsidy so that we can cut out leakages.

“Schoolbuses for example. We have to have a mechanism on how to deliver the diesel (subsidy) to the schoolbus drivers so that the cost of transport will not go up,” he said.

Without the subsidy, diesel will cost more than RM2 a litre. The price of diesel at the pump now is RM1.581 a litre.

Shahrir said the move to restructure the fuel subsidy was necessary to ensure the money was not wasted through various ways such as diesel smuggling.

“We want to look at diesel first, then obviously we will have to look at petrol subsidies,” he said.

Shahrir said crude oil prices were at US$117 (RM372) per barrel, and the Government spent RM33bil on fuel subsidies last year.

He said another RM20bil of subsidy was spent on natural gas to subsidise Tenaga Nasional Berhad’s power generation.

“You are talking about RM53bil. And that does not include the subsidised amount that people pay. Our oil export in 2007 was RM77bil.

“So it is almost one-to-one what we consume and what we export,” he said.

On the Food Security Policy, Shahrir said it had been discussed in Cabinet and the Agriculture Ministry would look into increasing production to counter inflation.

“What we have not resolved is the delivery and distribution to consumers. We need to take into account some things. For instance, I want uniform pricing for foodstuff in Sabah and Sarawak and the Peninsula.”

He added that the inflation of food prices was higher than the Consumer Price Index (CPI), which recorded 2.8% in March.

“We cannot use the CPI as an indication of inflation as it does not reflect the price rise in food. The CPI is a theoretical basket of goods based on the consumption of a theoretical average family.

“In the basket, there’s the food component, transport, clothing and so on. If you take out other components and only focus on the food component, then you will see that the (inflation) rate is higher than the CPI,” he said.

Source The Star

The crude oil price per barrel has significantly increased for the last few months where the current price has touched USD 117 per barrel. We cannot avoid the impact from the uncertainty global crude oil market due to the shortages of crude oil supply from the producer countries where the demand is constantly increased in China. OPEC plays a crucial role to determine the quantity of crude oil barrel that needs to be marketed in the global market. Saudi Arabia and other OPEC countries have taken an action to reduce its crude oil supply due to the several reasons (maybe political and self-interest).

Meanwhile, Malaysia is among the crude oil producer that suffer from the fluctuation of global crude oil price. In 2006, the crude oil production has been forecasted approximately 700,000 barrels per day where domestic consumption is about 500,000 barrels per day and 200,000 barrels per day is considered as a safety stock (Source: Energy Information Administration). From this we can see that, the Malaysian oil market price is not supposedly affected by the global crude oil market price which Malaysian's crude oil production is more than the actual consumption. Therefore, the Malaysia government should not determine the retail price for petrol & diesel base on the global market price.

The retail price for petrol and diesel should be determined base on the people capability to pay but not based on the global market price . The government think they can disillusion the people of Malaysia by giving the subsidy for petrol and diesel. By giving the subsidy only give an advantage for high income group and let the lower and middle groups are suffering with the current rising cost. The subsidy on diesel is not the wise option and mechanism to gain political support from people of Malaysia.

Malaysia crude oil is badly affected by global crude oil price because our crude oil is exported to another countries, therefore it will increase our country revenue in international trade. The revenue gain from export of crude oil was mismanaged by certain group of crook (in Petronas). So, we have to relying on the import of crude oil from other countries (producer of crude oil) to fill up the domestic demand.

My strategic advice for goverment is please stop or reduce our crude oil being exported to another countries and use it wisely to fill up our domestic demand. So we can fix the petrol and diesel price according to public capacity to pay. Increase in crude oil price will benefit certain of people (oxy moron in Petronas) plus several ministers and family, whereby the lower and middle income group will suffer at all.

I'm writing this base on the facts and analysis gathered when I was working as the analysts for world and Malaysia crude oil market and industry. In fact, Malaysian is rich country but momentarily being mismanaged by corrupted government administration.

Hidup Malaysia!!!!!!

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