Some more light on this mysterious subsidy thing:
Most of the country’s oil fields contain low-sulfur, high quality “sweet” crude. Malaysia exports the majority of its oil to Japan, Thailand, Singapore and South Korea.
This from The Star:
Commenting on the fuel price increase, the Petronas boss said the corporation did not make a sen from the increase.
“All the oil companies get full market price for the petrol and diesel that they sell and the Government pay them the difference from the fixed price. This is where the subsidy comes into play,” he added.
So, if I read him correctly, there are actual subsidy payments to the oil companies – the difference between the market price and the price at the pump. (Does that mean we are also paying foreign oil companies a subsidy for the privilege of selling oil in the domestic market at a discounted rate?) Now, what I want to know is how much did the government pay each oil company in subsidies? Come on, give us the full picture, the breakdown of subsidies to each oil company, facts and figures.
Asked about criticisms that Petronas’ accounts and profits were not transparent, Hassan said the corporation published a very detailed annual report which was deposited in the Parliament library.
“For all intents and purposes, Petronas is a public-listed company because we are rated by agencies like Standard and Poors, and Moody. We do not hide anything,” he added.
That is being disingenuous. That glossy annual report doesn’t tell you much. From what I see, it just shows certain financial highlights such as profit before tax etc.
What we want to see are the detailed accounts. You know, like a detailed profit and loss account – not some summary financial highlights. I for one would like to look at the detailed operating and administrative expenses and the investments in fixed assets to see if everything is above board.
And while we are at it, let us have a look at the auditor’s report. How independent is the auditor?
This is the people’s money we are talking about. There must be greater transparency than what we have seen so far.
Now I know those in favour of removing subsidies say the rich, with bigger cars, are often the greatest beneficiaries of oil subsidies. And I can see their point of view. A more accurate market price for oil would encourage conservation and all that. The removal of subsidies would also make us regard oil as the scarce resource that it is especially in the face of increasing difficulty of finding new easily recoverable oil reserves to meet rising global demand. Heck, it might even save the planet from global warming. All these are important considerations. I have always believed in advocating people-centred development that is less polluting and damaging to the environment. Reducing our fossil fuel dependency would be a great step in that direction.
But to raise the price by 40 per cent at one go – when you know that is going to have a sharp knock-on effect on the prices of other essentials and hurt the lower-income group – does not make sense. Especially when the government has not put in place efficient public transport options – and is not likely to do so, given its record. Neither does it inspire confidence that it will effectively empower the poor with the additional resources now at its disposal.
In the first place, are the present high oil prices realistic – or driven by speculation? Listen to what Malaysia Airlines CEO Idris Jala says – and I agree with him:
He said the present oil price at over US$135 was unrealistic and based on certain global events that might have caused a shortage of supply.
“These people (speculators and hedge funds) buy oil futures and say that this or that event may cause an oil shortage.
“Not very long after this, people react to this and by then the message would be ‘there is a shortage of supply’ even though there is none,”…
Speaking as a former oilman, Idris said there were two ways to see whether there was an oil shortage.
“First, look at the oil tankers at sea. If they are not moving and just floating out at sea, that means they have no crude or processed oil to transport. That is not happening and that means there is no shortage.
“Second, go to the petrol stations. If there are long queues, that means there is a shortage. Again, this is not happening and this can only mean there is more than enough supply.
“As an ex-oilman, I tell you there is no shortage.”
Idris pointed out that certain analysts and financial companies that produced reports about the shortage were also oil futures traders.
Asked what he thought was the fair value of crude oil at present, Idris replied: “US$40.”
Idris confirms what I have believed all along. It all boils down to a cheaper US dollar, weak US equity and housing sectors fuelling speculation in safe havens such as commodity futures and hedge funds (including oil and food).
Check out the view of one analyst, Mike Whitney:
The Commodity Futures and Trading Commission (CFTC) is investigating trading in oil futures to determine whether the surge in prices to record levels is the result of manipulation or fraud. They might want to take a look at wheat, rice and corn futures while they’re at it. The whole thing is a hoax cooked up by the investment banks and hedge funds who are trying to dig their way out of the trillion dollar mortgage-backed securities (MBS) mess that they created by turning garbage loans into securities. That scam blew up in their face last August and left them scrounging for handouts from the Federal Reserve. Now the billions of dollars they’re getting from the Fed is being diverted into commodities which is destabilizing the world economy; driving gas prices to the moon and triggering food riots across the planet.
Related posts:
Merican has been too well house-trained to indulge in Govt double-speak. He has been at his job too long and needs to be replaced so that a new broom can come in and sweep out the cobwebs at Petronas. It has been proven everywhere in the world that it’s too dangerous to allow one man anything more than 10 years in his office e.g. our own Samy Velu, Rafidah Aziz and Dr. Mahathir and say, M.Green, CEO of AIG USA.
Rumours are that Petronas is over-staffed by at least 1/3. Besides funding PMB (leases planes to MAS) & Prasarna (buses) it also finances the University at Tronoh (about which there is little publicity), F1 & the Philharmonic Orchestra. And God alone knows what else!
The Financial Statements of Petronas ‘filed in the library at Parliament’ (& what kind of nonsense is that?) are of course the abbreviated one, so there is no accountability especially re overheads and whether they are in line with internation norms. Not to mention the basis on which contracts are awarded and who awards them. Are their FS audited by any of the Big 4 firms at all? We have damn good reasons for disquiet when we are unable to answer such questions because of the fog & haze surrounding a major concern which is owned by all Malaysians.
As regards the current oil price, it has been clear for over 3 years that like the forex trade, the volume of futures trading exceeds the amount of oil production AND reserves by miles! Many hedge funds speculate on oil, since the controls over equity & bonds trading has tightened considerably and super returns are scarce. Therefore, it is the speculative element that has caused this global problem, including in food prices.
Dr/M was spot on in 1997 that this kind of speculative trading should be outlawed. In the futures market, only registered buyers & sellers who supply and take physical possession of oil, metals, commodities etc for induatrial and comercial reasons should be allowed to trade; not those who deal in the virtual world like… the unconscionable ROGUES who distort markets with their huge trillions $ capital bases. Don’t also forget Goldman Sachs whose self serving oil predictions (of $105 1 year ago)was frequently followed by gloom & doom news about Iran, Iraq, Nigeria, Peru & Venezuela.
But, like Dr.M posed, who will bell the cat in the western world?
But they, like the currency traders must be brought to heel soon!!
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Way to go brother. At least I know I’m not alone calling out loud for Petronas to reveal their books. These “book keepers” operate on the principle that they could remain kings if they keep the public unaware of their book keeping methods.
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I would just like to touch on the last part of your post…
While I also agree that its excessive speculation that has driven the oil price to its current levels, the fact remains that oil is actually selling above $100 barrel.
We can choose to consume it, OR sell it at this time of high prices (artifically high prices due to speculation do not last long) and put the money to good use. Like public transport, universities, medical schools, even buying assets overseas (that will generate a steady flow of dividens back to the govt), etc.
The real problem today is the govt’s accountability for its budget, not just Petronas’s revenue, but all expenditure as a whole.
For all the benefits of selling the oil at market prices (as you’ve already mention is passing in your post), oil should indeed be sold at market prices to consumers, industries, TNB and IPPs. What we need is a systematic and compasionate transittion & full accountability for all govt expenditure. That should be the real issue, not the price we sell petrol at the pumps.
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Whitney reports “The Commodity and Futures Trading Commission (CFTC) is investigating trading in oil futures …..” was filed last week and surfice to say, the hounds are on the loose.
Signs are, members of Congress are just as worried as any of us that oil futures show an upward trajectory. State side, there would be some positions unwinding for fear of entities/players running foul of the tax man but other than that, it would be highly unlikely/difficult to prove collusion or price manipulation.
Of course, mine is just one opinion and I could be proven wrong.
It is a good starting point for the CFTC to inquire about prices in very broad strokes and who knows where this might lead to and if there is discovery of any unscrupulous elements, no doubt it would be straighten out in quick time because no one wants to mess about with any inquiry that might arise from CFTC’s finding – the Commission got bite unlike ours, Royal or run of the mill type Commission…
Citizens of the world should be hopeful CFTC finds ‘something’ or at least dampen the momentum of spiralling prices but I’m pessimistic. There are just too many players involved and those in the game are raking it in.
So far, delivery has been met at whatever price struck on the spot market and till the point where traders are force to sell because of an over bought position, prices would remain. There is no sign of weakening demand as yet but something has got to give.
Conventional wisdom says oil is overpriced. Soros says ‘bubble’ but still it is a scary thought the world is closer to USD$200 pb. We are all at the mercy of big money sloshing around making the trades.
Hang tight M’sians and citizens of the world, this may be the beginning of a long turbulent ride. Seems to me, the world is on a bad acid trip.
Regards all.
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Well done! For enlighting the Rakyat with facts & sense!
Just not like what is or was being uttered by the most unpopular PM (in the history of Malaysia premiership) with wishy-washy and pack of lies to the Rakyat!!!
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When truth fails in leaders’ lips
Holes after holes they dig
Finally they can’t do it
There is no ground to hoe
Then the rain falling
They see the water clogged holes
They get wet soaking it through
Now they understand
Losing hundreds of billions
They have to off-load somewhere
Artificial manipulation in markets
It is for the sole purpose to profit
The future traders and investment banks
They lie and they cheat to pocket it
Losses hard to swallow
In this way recovery can be met
At the expense of the people
Around the world
Our BN government telling lies too
So many holes they can’t fill it up quickly
One lie to another
They will not find people swallow it whole
Not like those generations of long ago
The country is an oil producing country
Reaping record billions profit
Every time the crude oil price increases
The Petronas rakes in huge returns
And yet the government leaders say
A different story in the camp
It is about the corridors
Feeding to the cronies to prosper
Needing funds to make into white elephant
It isn’t about the people for the people
It is about them and their partners
Swallowing the wealth of the nation
Enough of the lies
National companies should assist the people
It seems the people are helping the national companies
Reaping hundreds of billions
And they tell us to change our life styles
They don’t walk their talk
They just hypocrites milking the people dry
Tell the truth
It will set everything free
Tell a lie
No light shall shine in a life
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It sounds like a conspiracy theory.How should Malaysia deal with it? We seem to react by subsidising or not subsidising the price.What is the Nation’s long term plan in dealing with problem of relying on oil. What alternative do we have? I have yet to know the views of BN and the Opposition!
Both side seems to be bugged with the quantum of “subsidy”! Does the Nation have any “wise” man around?
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Very detail write up,
BUT AS I SAID B4
MALAYSIA HAVE EVERYTHING (ACTUALLY ITS HEAVEN) BUT HAVE NOTHING (BRAIN)
rajraman666-people like u soon be a extinct from Malaysia because the goverment dont need people like u with brain asking question.(ITS A SURVIVAL FACTORS AND THE MAJORITY IS BRAINLESS,So you or others with brain is minority)
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[...] What next, Pak Lah? Maybe some lights on this mysterious subsidy thing! [...]
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the govt brings hassan out to spin trying to add some credibility to their reasoning for the whopping hike.
tell you what, hassan is just trying to bulls*** and I am prepared to debate with him;me a novice and he an oilman and lets see who is right.
simply, take 2007 position. Petronas paid a whopping RM50 billion to the government representing more than 30% of the federal revenue. Now, whats the price of petroleum then. Average US$55 per barrel? After paying the federal government, how much did Petronas make? More than RM30 billion, if I am not mistaken.
Fast forward now. Average crude now US$100 per barrel which is more than 50% higher than last year. Did the volume of production go down? No, it hasnt. So, the additional US$45 per barrel will translate to how many billions to Petronas in additional profits. Assuming 650,000 barrels per day, Petronas is making US30 million a day which translates to US$11 billion additional income per year. Would Petronas go bankrupt by foregoing this super profits? Answer is a clear no coz petronas still makes RM30 billion a year after providing the additional subsidies with the super profits! And I havent count the additional premium in pricing of Tapis crude over low quality high sulphur oil that the country imports for local use.
Now, my argument will go out of the window if Petronas has sold forward its crude oil substantially. Well, we never know coz Petronas is even more closely guarded than St. Peter’s in Rome.
Who will benefit by maintaining the subsidy then? obviously, the rakyat! and of course the big time smugglers too. Surely, the smuuglers can be nailed unless the customs and other Authorities are “closing one eye”.
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Scrap the NS programme to save money!
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Recall back,
If i am not wrong IDRIS JALA was appointed to clean up mess created by TAJUDDIN RAMLI.
IN between his employment the brainless people want him to resign because he have the brain…
So check it out-its true why the majority brainless people dont hire the minority with brain.
I follows up about IDRIS JALA employment time and the political master warlords (in this case AAB very persistent to keep idris jala) pressure for him to leave MAS.
Rajraman.Ocassionally got brain to recall.
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After reading all the comments, I can see that we are all shooting the stars. The plain truth is this “Ask no questions and Hear No Lies”. The key word is actually “Subsidy” which has no meaning unless the truth is told. We have Petronas CEO saying they don’t make a sen even with the petrol skyrocketing…..But Badawi is saving RM13 billion per month on subsidy( correct me if I am wrong). So the figures don’t add up. The next question is, if Petronas don’t make the extras where was the Subsidies going to……? Huh, our BN Govt. is paying subsidies to somebody….not Petronas as confirmed by their CEO……Now, that should be the question of the year. I know I am not going to get the answers because RM13 billion per month is a lot of money. Knowing that we are all going to continue to listen to all the crap, bulls***, halftruth, lies..etc which have been thrown at us. People who have brains have migrated, leftout….or practically force to shut up of face ISA. Look what happened to Hindraf.. Its time to look to the ocean. This devil has been in power for too long.
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Don’t waste time, just get the guy to resign. Into his 2nd. term and what did he gave us. Big price increase for petrol and diesel. During his 1st. term he gave us 30 cents increase for petrol. If you can remember, that increase is the highest that Malaysia Have experience. To the BN parliamentarians come on don’t waste time. Join Paakatan Rakyat. It is your duty to do good for the people and country
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The world will never learn,take the greedy producer’s if they would have upped their production n flooded the market we would have seen the last of these speculators.
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Everythings going up but nothing come down except spending power.
I am very very efficient wents comes to works.I dont have a driver althou i can afford one.With small company specialised and honour my words i survive throu many hard times but this hikes
1.My cost of travelling up by $1.00 perliter (use foor wheel drive diesel engine.)
2.My supplier just refused to supply some materials for my work until the supplier work out a formula to increase their running cost.(solve immediately by giving in whatever price)
3.In between i need to continue work or jobless which all my workers will be jobless or i absorb their salaries and counting the day i loose.
4.A 40% increace in actual term is not-the prymid works this way.
1.soil digger- need diesel-=increase 40%
2.The lorry driver/owner who buy from the soil digger increase 40%.
Simple as that,my material cost increase between – u count mr.anil-i never pass my maths from form 1 until form 6.They increase per load of soil from $160.00 to $250.00
If i pass the cost to my customer – sorry now buyers market for works like mine.
rajraman-This is the beginning after the goverment not performing-soon the businessman will not perform too.Later this not performing dease will spread like wild fire to the rest of Malaysia -ECONOMY SLUMP-COMING SOON.
OR- should i terminates my workers now and keep quite which if i do that i can survive at least for the next 10 years goyang kaki.(CAN I BE SO CRUEL to my workers who gave me the 10 years luxury goyang kaki – MR.PRIME MINISTER)
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When we talk about oil subsidy
There’ll always be some mystery
What you see are only figures tidy
While the rest are hidden in some ministry
(C) Samuel Goh Kim Eng – 080608
http://MotivationInMotion.blogspot.com
Sun. 8th June 2008.
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What sort of logic is this?>>
“First, look at the oil tankers at sea. If they are not moving and just floating out at sea, that means they have no crude or processed oil to transport. That is not happening and that means there is no shortage.
“Second, go to the petrol stations. If there are long queues, that means there is a shortage. Again, this is not happening and this can only mean there is more than enough supply.
“As an ex-oilman, I tell you there is no shortage.”
>Cant he picture the shortage which arise from a sudden increase in demand? So much so that even when all the tankers keep moving, they are not able to satisfy the demand and thus causing prices to rise?
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just change. change govt i mean.
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