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.