I think it’s about time we slashed the petrol price, don’t you think?
When the price of petrol was increased from RM1.92 to RM2.70 – a hike of 41 per cent – on 5 June, the price of Nymex Light Sweet Crude was around US$125 per barrel (on 4-5 June).
The current oil price is around US$56/barrel, which is less than half of what it was at the time.
And yet, after three four reductions, our petrol price is still RM2.30 2.15 – nowhere near the RM1.92/litre of 5 June, when the price was US$125.
Even if we take the price of RM2.70 at 5 June, a 50 per cent reduction in line with global prices would be RM1.35/litre – certainly not more than RM1.90. It’s time for a sharp drop in pump prices.
But the most we can expect from this government is a 15-sen reduction to RM2.15 2.00/litre, which will not have much impact on overall domestic demand/consumer spending unlike the sharp rise earlier. Neither will it be able to reverse the rise in food prices as a result of the sharp hike earlier.
A sharper drop in petrol prices, on the other hand, would stimulate domestic demand and local economic activity. It will also give traders and transport operators no excuse for maintaining high prices and thus lead to lower food prices.
Of course, such a sharp reduction in oil prices would have implications for our worsening budget deficit. So the question that arises is what happened to the extra revenue the government earned when fuel prices were soaring?
That said, the danger of slashing oil prices is that we might lose sight of the need to improve our public transport, to encourage fuel conservation and to explore alternative energy sources such as solar. Despite any price reductions, we must maintain our resolve to improve in these areas.
In the long run, we still have to move towards a more sustainable domestic-driven economy.