As you can see, the global oil price has actually dropped over the last few years. So why has the domestic oil price gone up by 20 sen per litre?

Crude Oil Brent price over the last decade

This is a press statement from Institute Rakyat:

Not just a fuel price hike, this is BN’s long-term policy failure

The Barisan Nasional government’s move to raise the price of petrol and diesel today once again demonstrates its wrongheaded approach to economic policy and national development.

Before cutting fuel subsidies the government should have ensured that public transportation was adequate and Malaysian wages were healthy enough to withstand a jump in prices.

World oil prices are at a three-year low and have been on a downtrend since July, public transportation has been neglected in favour of private vehicle use, and no adequate measures are in place to cushion lower-income households from a rise in prices.

By raising RON95 prices RM0.20 – nearly 10% – to RM2.30 last night consumers can expect across the board inflation. Yet, the downward trend in world oil prices means the government will be enjoying an even lower subsidy bill than it did previously.

With falling fuel prices the government could have held off rolling back subsidies, but Malaysian consumers have no immediate alternative to rising costs.

The short-sighted policy decision taken during the Mahathir years was to promote mass private vehicle ownership in order to sustain a national automaker. This meant short-changing strategic investment in high-quality public transport infrastructure with integrated networks of bus, rail, and taxis.

Whilst some individuals profited handsomely out of national auto sales, ordinary working people had to take on burdensome auto loans. The situation for the consumer was made worse by Mahathir’s decision to specialise the Malaysian economy in low-wage, low-skill production.

Having a viable public transport alternative would have given a boost to the disposable incomes of workers and freed them from one source of debt. As it is, were commuters to abandon their private vehicles today and convert wholesale to public transport the latter system would not have the capacity to move them efficiently.

A matured public transport system would also have spared the government the fiscal pressure of maintaining fuel subsidies for so long. BN’s historic policy mis-steps ultimately result in the lower-income households taking the brunt.

The BN government likes to talk of BR1M handouts when it rolls back subsidies. Indeed, the Domestic Trade, Consumer Affairs and Cooperatives Ministry has said that more BR1M is forthcoming to alleviate the subsidy rollback. But it will be too little and too late for those poor households living hand to mouth.

BR1M has a lag time of two or more months after the Budget is tabled. Yet fuel is a weekly, even daily, cost for the poor and represents a higher proportion of their income than it does for wealthier households. BR1M is a temporary injection. It falls far short of what the poor need: structural change that helps them graduate out of hardship.

It is irresponsible and unjust to squeeze the incomes of the poor before having a timely solution at hand.

Any discussion of ‘fiscal rationalisation’ cannot close without mention of the inefficient and wasteful manner in which public monies have been spent by the BN. Every year the Auditor-General’s report identifies billions of ringgit wasted by government and its departments. Few are called to order, instead the burden of meeting deficit reductions falls on the consumer.

We are supposedly six years away from becoming a ‘high income developed nation’. With clunky policy mis-steps like this it sure doesn’t feel like it.

Yin Shao Loong

Executive Director
Institut Rakyat
Petaling Jaya

Please help to support this blog if you can.

66 COMMENTS

  1. There is not hope of fixing the system. It is as hopeless and outdated institute rakyat director statement

    Public transport is NOT silver bullet, “public transport” is merely an 1970 wet dream, in year 2014, I am surprise that many Malaysian including many so call “expert” still can get rid of it and start looking into alternate transportation, like electric pedal-assist, electric bike,etc, which is proven in megacity such as shanghai and beijing.

    On the other hand, the country fail cannot get rid of the sinking cost national car (proton & perodua) and motorcycle (modenas) project. Both employed more than 30,000 workforce. Fully privatised those company is unthinkable for Umno, because the cronies contractor rip many millions. Even government had to use “safety” as excuses to slap many red tapes to curb electric bicycle usage and sales.

    At the end, the people can do little to save themselves but wait Rome start burning.

  2. Good comment on Malaysiakini:

    Instead of questioning the government why our education system has deteriorated over the decades, they want the only working system – the vernacular schools – to be closed down as well.

    Instead of questioning the government why oil producing countries charge their citizens much cheaper petrol, an Umno leader even sees fit to praise the PM for the hike in fuel cost.

    Instead of questioning the government why there is no transparency in Petronas as it only reports to PM, some Umno leaders even defended such a practice.

    Instead of questioning the authorities why so many detainees died under police custody, some even see it necessary to defend the government on this.

    Instead of questioning the government why our police chief can get away not following the law he is entrusted to enforce, some see it necessary to defend him for his recalcitrant action.

    Until and unless Umno delegates at the party assembly next month hold the government accountable, nothing will change.

  3. As usual Umno will divert the frustration of malays towards Barang Naik by racist statements this time calling for vernacular schools be abolished. The Umno assembly should be focusing on the hugh debt incured by BN and 1MDB, right? What say you tunglang Abdulah?

    • See who is diverting scorns?
      What a ultra-racist Kapitanist minion yang hang mak + bapa tak ajar sopan!
      “Either you are with us or you are against us” on racist line is your trolling, betul kah lazlo?
      Grow up, sudah 57 tahun Merdeka…

    • Many non-chinese are enrolling in chinese vernacular schools.

      Loke at Shila Amzah now earning big bucks acquiring Mandarin language and sing Mandarin songs to the world market.

      Look at 8TV’s Baki who can converse well in Mandarin (although his acting still need brush up).

      Shila & Baki a living proof to UMNO that they don’t abandon their roots yet they get gel with other communities !

      • Kevin Rudd: Learning Chinese Is a ‘Doorway to Understanding’
        http://www.youtube.com/watch?v=Sp-LL4IOyn8

        LOS ANGELES, May 8, 2014 — In the keynote address of Asia Society’s 2014 National Chinese Language Conference, former Australian Prime Minister Kevin Rudd, who speaks fluent Mandarin, cautions against five commonly held misperceptions of China and speaks of language as “a doorway to understanding.”

        ps: Malays (except Shila Amzah) are crazy about K-Pop but did not realise that Mandarin has more commercial value.

  4. Where Malaysia ranks on human development index i.e. Number 62

    http://hdr.undp.org/en/data

    Mr Yang’s possible Dr Pangloss reactions:

    1. “Yay! We are a leader — amongst Third World nations”
    2. “Yay! We rank higher than Thailand, Indonesia etc. Unfair to compare with
    Singapore — small population, small land area”
    3. “The Western-dominated UN’s plot and propaganda to discredit the great progress made under our wonderful UMNO-BN government”
    4. “It does not matter where we rank. Just be grateful for the wonderful job done by
    our UMNO-BN government”. “Ignore the rankings (just like how we should ignore
    the world university rankings)”

    • Our local universitiess dare not participate in university ranking with the world as they prefer to be Jaguh Kampung?

    • Phua, Lets put politics aside. 62 out of 189 is actually not that bad is it not. As for Singapore with its size and population its density is high compare to Australia or Canada. Although its density is high, with its small population the govt is able to build more amenities and infrastructure with ease and less financial burden.. Let me give you an example of the house of 72 tenants where approximately 200 people staying together sharing the same amenities. Compared to a family of 5 person would not this family have a much better quality of life. Yes we can still uplift the quality of of life of these 72 tenant with more amenities but will that lead to a better quality of life as compare to the family of 5. What I am trying to show is that with a smaller population the quality of life will definitely be much better except for the country that are really really backward that cannot move forward due to bickering and turmoil in their country. The current govt may not be that perfect but looking at fiasco of Pakatan Selangor and Penang, I think its quite risky to let our country be managed by Pakatan

      • No, it is not when (1) Malaysia is an oil-exporting country and (2) South Korea ranks 15, Cuba ranks 44, Chile ranks 41, Uruguay ranks 50 and even Argentina (for all its economic troubles) ranks 49 and (3) Singapore has left us behind in the dust.

  5. Anil
    Give u a scenario
    With end of supercycle and peace in middle east as well as continued surge in shale oil and.gas production in united states brent goes down to usd 70
    Govt will no longer be subsidizing but at current retail price an indirect tax surplus accures
    What happens to petronas? A 40% decline in top line n 25% decline in profitability estimation
    What happens to contrbution from petronas to coffers of federal govt?
    Lets say a lower impact at 20% level hence revenue from petronas to govt, that means ard 32 bil
    So the savings of current level 20b from subsidy rationalisation will be negated by drop in contributions from petronas
    In fact there is a 11b gap based on abive scenario
    How is the govt going to fill the gap?
    Easiet way is just to retain the petrol retail price and use the indirect taxation to fill the gap
    Plausible?
    I will stand corrected if my assumptions are totally out of whack
    Moral of story: current govt spending with extremely high opex leave the govt very little room to manuevor . If a black swan event occurs good luck guys
    Niot that as a citizen would i wish the worst to happen but my take is that reforms are critical for sustainability of govt finances

  6. Hong Kong’s own version of ‘Do You Hear The People Sing’ (Les Miserables).

    Not sure when the BM version will appear in Malaysia.

  7. As Proton released Iriz, it is good to note that the world is moving towards electric car (or even self-driving car) as reported in the Taiwan CTI’s channel here:

  8. The Genuine Progress Indicator used to study 17 countries (1/2 the world’s population) showed a steady decline since 1978 unlike GDP. Let us not kid ourselves. None of this is accidental. Capitalists and their friends (authorities and apologist economists) everywhere are well aware of and benefit from all these: informal and exploited work, upheaval and fear-monering, resulting migration and low wages, secrecy, profit from risk to public wealth or the commons, massive subsidies and rescues, manipulation of underregulated markets, deliberate failure to maintain public assets or put aside required funds, selective and nominal enforcement, suppression of dissent.

  9. Simon Kuznets (father of national income accounting) wanted the wealth of a nation (measured by the GDP) to include work done by women at home to be included too. This was never taken up by the economists. Following the logic of Kuznets, the real wealth of a nation should also include domestic production, non-market production as well as the informal and underground economies.

    Then the distribution of income and wealth should also be considered. And to make comparisons between nations possible, we should take into account PPP (Purchasing Power Parity).

    I also take the view that the “bads” produced (such as pollution of the environment by foreign companies such as Lynas) should be deducted from the GDP.

    I doubt that Malaysia is a “developed country” when our distribution of income and wealth is so unequal, when accelerating inflation is eroding our purchasing power (because of fiscally irresponsible behaviour by our 1PM-cum-Finance Minister), and when the “bads” we are producing are damaging our health, damaging our environment and lowering the quality of life.

    Instead, we should pay more attention to Quality of Life indexes and see where Malaysia ranks as compared to nations such as Norway, Sweden, Finland, Canada, New Zealand etc.

    • The most developed country in the world may not been the richest country or with the highest GDP. The highest GDP country may not be the richest or the most developed. The world richest or highest GDP or most developed may not necessarily have the highest quality of life. Don`t compare our country with Norway, Sweden, Finland, Canada or New Zealand which have low population. Try comparing it with Latin America, Africa, Middle or most of Asia. You can even try and compare it with some of the most developed and rich countries like the US, Japan, HK, Italy, Portugal, former Soviet bloc countries or many Middle East countries.

      • 1. So, going by your logic,

        Canada population = 35 milion
        Australia population = 23 miilion

        Can compare with Malaysia !

        2. Take a look at how Quality of Life indexes are constructed. Then you can see that countries (with reliable statistics) can be compared easily.

      • You are taking a few countries with high quality index and compare it with our country. If you are not bias you should have let us know where our country stand among the 200 countries in the world. And talking of Canada and Australia, bear in mind that their population is consider small if you proportionate the size of these 2 countries with its population.

    • Quality of Life measurement.

      Just go to Msia-owned Giant hypermarket operating in Spore. They offer more varieties of grocery items eg some imported one. The Giant in Malaysia carry limited stuff just essential ones mostly from domestic producers.

      So the day Msians can enjoy quality foodstuffs from overseas and the pockets do not feel hurt then we truly have Quality of Life index high up the listing !

    • Quality of Life in Malaysia is always excellent if we compared to Myanmar, Bangladesh, Ethiopia etc.

      No point high income high outcome nation so net net still deteriorating quality of life.

      • Before making comparison ask Phua to show us the standing of our country among the 200 countries in the world. I want you and that ignorant Kee to come out of his flat and see before making outlandish statement. You will be surprise where we stand !!!!!

  10. Ah nar nar, you are most cute, why do you commit the sin of presumption, you will be surprise if i were to tell you about my ownself, ok. Ta ta !!!

    Phua Kai Lit, ah nar nar said this kk land is almost near to be a developed nation, is that true? Can you please enlighten, tq !

    • When the young one called you moron and under the tempurung, he is very right.
      Malaysia GDP stand at 29 out of 186. Wake up and don`t keep whining. Like the young one said get out and see the world. We don`t presume but your CAT and Pakatan always lie just like where is the water agreement which was signed only recently.Tony Pua said the state govt has no agreement and moron like you believe in it.
      http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29

      • I thought the young ones called you and tunglang moron, not me la Ah Nar. Looks like you are mixed up!!!

        Ah Nar, of late did you frequently misplaced your home key, car key and things like those? Am worried for you, please take it easy dont have to worry for your AH government.

        This AH government is going to be a developed nation soon and kk land finally catches up with the SG land, ha ha ha !!! Dream on …….

      • No need to be in a state of denial. You should know whom I am referring to as the young one. You want to shiok sendiri go ahead

      • kee, Lu orang pandai tapi kurang ajar dan kurang sopan.
        Panggil nama tak sedap, hina menghina orang, begitu lah perangai orang cosmo?
        Your Lord teaches you these things? or is it the Cat?
        Better pray hard and cry out loud!!!

  11. Look at some of the countries that have gasoline prices that is higher then us. How good is their welfare compare to us. . Either you are blind or in a state of denial. To the one that whine, I get up and take a deep breath and face the world and continue to fight and get the most of it despite whatever obstacles like higher gasoline but will not whining making high and unpleasant sound that continues for such a long time in his flat like a cry baby. That will be the folly if our country is made of such people. We do not want our country with people that rely too much on welfare. We want a nation of people with dignity.

  12. even if crude goes below USD80, believe me, consumers will not get the benefit of lower petrol prices at this crude price level.
    at this price, Petronas earnings will be hammered. which means, the government which relies on >40% from petronas for its income, will see an increase in deficit.
    do your maths, anil.
    either way on price of crude, consumers will bear the brunt.
    when the OPEX (before fincnail cost) of govt is > 80% of the revenue and current high deficit, there leaves little room for the govt to adjust but to find more ways to increase revenue via direct and indirect taxation,

    • So you are telling me, whether the price goes up or down, the rakyat get hammered? Something wrong with this picture.

  13. Putting aside the argument of government wastage, I support the removal of all forms of subsidies.

    I believe subsidies actually causes inflation as it creates artificial demand. If we borrow to maintain subsidies then we should also take into account the interest we would have to pay in the future.

    The way our country is managed looks very similar to a Ponzi scheme, and I would expect it to end all the same. The signs are there.

    • Remove all subsidies? Then the cronies will swallow more. Never expect things to benefit the rakyat if that is happening although some will be too happy and jump with joy to receive the negligible token in BR1M. I hope you are not the type of rakyat. ABU!

    • There’s demand pull inflation and then there is cost push inflation.

      If you raise the price of fuel again and again, you are contributing to cost push inflation.

      There’s nothing wrong with some degree of subsidy if a country can afford it and if the
      subsidised price is not too out of whack with the market price.

      For the former, you can do it Singapore-style e.g. higher subsidy for lower class beds
      (used by poorer people) in public hospitals. In other words, higher subsidy targeted at poorer people. Nothing wrong with the water subsidy in Selangor – but perhaps it should be limited to less than RM10. Any usage above the subsidised amount (average amount used by poor families – RM5?) should be charged higher and higher.

      In the case of the latter i.e. subsidised price is much below market price, it can result in a lot of wastage and smuggling to neighbouring countries (like Venezuela’s petrol being smuggled into Colombia).

    • Our country is almost near developed status. You should be thinking of how to uplift one own self standard instead of wondering

      • Near developed? Why then Najib is still giving out BR1M when his cabinet has said that average household income is now RM5900? Why Rinngit is depreciating as one USD now can fetch RM3.27? Can you trust the figures from Bank Negara?

      • lazlo, Are you telling us that even if we are a developed country or rich country, the govt should not have programs to help the poor citizens.. Even in the some of the richest countries there are also welfare program for the poor. And please don`t tell me that a rich and developed country has no poor people like some smart guy here presuming. Do you understand average household income. ?????

        These are the 10 countries with the highest income per capital meaning that on an average each citizen is earning that much. Household income try and time that by 3 and see how much you get. Norway – 43,400, Switzerland – 40680, US 37870, Japan – 34180, Denmark 33,570, Sweden – 28910, UK – 28320, Finland – 27060, Ireland – 27010, Austria – 26810 and its all base in US dollars

        So the smart guy is telling that there is no welfare program or no poor people in these countries. Come on man wake up.

      • No need to argue. The fact that the nation has huge deficit is a proof that BN has failed.

      • owc ; A huge deficits does not mean that the country has fail. Its just that the country is importing more than exporting. On the contrary the huge deficit show that the people could be now more affluent with the penchant for niche and branded imported products.

  14. Hassan Malek said reduction in fuel subsidy is to help to reduce the nation’s deficit caused by decades of mismanagement and wastage by BN and to enable Najib to pay more BR1M to retain the kampung and rural votes?

    • Hassan Malek should instead ask Najib to reduce the bloated hearcount in the civil service, many of which are redundant deadwood to reduce the fixed cost incurred by the government in order to reduce the financial deficit. No need for him to insult our intelligence that 20sen is minimal.

  15. Subsidy reduction for the rakyat, no subsidy reduction (as amply documented every year
    by the Auditor-General’s reports) for UMNO Baru/BN-linked cronys ?

    • Exactly, if UMNO/BN is entitled to their corruption, why should the average Malaysian NOT be entitled to theirs in subsidies? (Investigate) a few UMNO/BN big wigs and take away their money (and must include Mahathir and Daim) and then they can start to talk about removing subsidies and GST..

  16. “it is much better to help the lower wage group via targeted actions and pump money into mass public transport infrastructure”
    What a nice thought. Except that it is not happening anywhere. Why have the popular public transportation systems of the past – trams, buses, rail, etc. – all been practically eliminated, except for token, badly run systems? Democracy is firmly in the pocket of those who have privatised it. In the most “advanced” countries, a large percentage of people are literally out on the streets in the cold – around 50% in the superpower country. Bolehland employers are spared having to pay living wages even if the gomen has to subsidise through various xx1M schemes. Such subsidies mean less critical expenditure including public works, medicines, etc.

  17. Very desperate, very desperate must be with the administrators to avoid bankruptcy, believe me more will follow a year or two before the next GE. The dorkys and schmucks are hoping that the voters will not remember all these but as I promise I will remind the voters of all these and also of all the empty promises these dorkys and schmucks have made !

    • Anwar and Pakatan promises a big reduction in petrol prices prior to GE 14. If we have voted them in and they reduce petrol prices and increase subsidy, our country will be bankrupt sooner than expected. The current govt is doing right by doing away with subsidy bit by bit.

      • Pakatan can easily reduce deficit by cutting down redundant headcount in the bloated and inefficient civil service, practising open tender, selling away 1Msia private jet…..

  18. Patrol price hike and can you be sure no price hike in other daily necessities before GST looming near ???

    My friends in Johor Bahru already feeling the pinch with the causeway hike at both ends from both Msia & Spore; squeezing the pocket harder !

    High income nation not in sigh but we are witnessing the escalating cost of living.

    • The express bus fare for JB-Singapore deturn journey to go up 31% from Monday. It will be RM11! Those JB folks taking such bus to work in Singapore will have to pay more due to the 4x causeway toll hike and fuel price increase.

  19. No disagreement with the writer. However, we see these ongoing, pervasive actions: (a) idling for long periods of vehicles (b) travel for fun, including illegal racing (c) needless acceleration and braking (d) inefficient new machines including vehicles (e) indirect subsidies of energy, e.g. for water. There are no minimum standards for machines including vehicles, for either fuel efficiency or GHG. Though catastrophic climate change is closing in, most people have their heads in the sand. If this price increase can reduce the enthusiasm for consumption in general and generating GHG in particular, then that is a good thing.

  20. What an asinine argument from supposedly learned analysts. In case you don’t know Institute Rakyat is an arm of Pakatan Rakyat as such an analysis lacking in logic and facts is very much expected. Even a schoolboy would tell them the world market price is far above the local fuel price due to the generous and wasteful govt. subsidies.

    You cannot argue against subsidy reduction based on any economic principles and this is the right and responsible move. Instead it is much better to help the lower wage group via targeted actions and pump money into mass public transport infrastructure.

    It is becoming increasing hard to comprehend Anil’s thought process – you are against this fuel price hike while loudly proclaiming your support for public transport systems.

    • you forgot to mention that we are paying the price of decades of wastage and financial mismanagement by BN. Tell Keng Liang that those countries have better welfare system.

      • Rusev, you might as well forget about that guy, he has nothing left but a mouthful of breath, that’s it.

    • many in Gerakan Youth committee resigned because of unhappiness over Tan Keng Liang. He should take care of his backyard first. Correct? Mr Yang?

    • Don’t just compare about prices of fuel in ASEAN, dare to compare with fuel producing countries? What about compare the prices of owning cars in Malaysia and our transportation system? Don’t mislead the public, we aren’t foolish after decades of lies.

  21. How and where else can the Umno dorkys come up with enough money to pay for all the inflated bills they have to pay and most of all to enrich themselves with ? Typical of Umno with their kind of policies to manage the country and also indications of how desperate they are to balance the books and to avoid bankruptcy. Now you also know why without the skills and the financial support of the billions of the immigrated at least who will have to come up with money that these dorkys cannot find the replacements. Worst of all these ‘experts’ is presently able to get some forms of support from the black gold but what other taxes will have to be implemented when the black gold has run out ? Can they continue taking funds out of the EPF ?
    May be the repugnant Mahathir will suggest how to tax the million of … immigrants he has (presided over)?

  22. Who says “subsidy rationalisation” was about prices?.”Subsidy rationalization” is about revenue for the govt. they actually said it so and again today. If oil price falls, Petronas revenue falls and the govt is even more short of money, so it makes absolute sense to raise prices..

    From the start, arguing about the pain to the rakyat made no sense but when it comes to UMNO/BN, the rakyat’s pain is never priority no 1. – its UMNO/BN own pain that matters first and foremost. The argument should have been first and foremost whether UMNO/BN deserve to have more revenue in the first place, not make assumption, given in from the start because the lines between Govt and the Party has been blured by the brain-washing for too long.

    Its amazing how critics have been technically INCOMPETENT of the term “targetted subsidies” used wrongly by Najib. “Targetted subsidy” for removing fuel subsides is NOT CASH – its PUBLIC TRANSPORT which of course too hard to do..Cash actually is general subsidies- it actually makes the proiblem worst by increasing inflation.. Just because its income based, does not make it “targetted”, its cash, it goes anywhere, and with lower income people, with poor control of spending and investments, it will not go where its suppose to go and hence not “targetted”.

LEAVE A REPLY

Please enter your comment!
Please enter your name here