A Starbiz report today speculated that “rising crude oil prices in the international market may up the pressure on the Government to review local pump prices to rein in the country’s huge subsidy bill”.
The report (++++Govt may be pressured to review prices of petrol) also noted that crude oil the day before retreated from a high of US$82 per barrel in New York overnight, but remained above the US$80 mark during Asian trading hours that day. At the current level, crude oil had surged 15% since the start of October and more than doubled from a low of US$34 per barrel in March.
The Starbiz report seemed to prepare the public for a scenario soon to justify the Government’s raising local pump prices. But the case is built on incomplete or false comparisons when reference is made to when the oil price was at a low of US$34 per barrel in March. The report omitted the fact that oil prices traded to a high of some US$150 per barrel not so longer ago. Also bear in mind that Malaysia is a producer of petroleum, which is of higher grade and hence commands a premium price, and that we are also a nett exporter of oil. The people at large have a right to ask why the Government is always using the “subsidies” element to justify any price increase at the pump but never sharing the profits the nation’s oil resources during oil price boom times when the world prices hovering at US$150 were almost twice the current price of US$80 per barrel.
It’s a case of “Heads I win, tails you lose” for the Government-cum-Petronas versus the Malaysian consumer. The media too must paint a balanced picture whenever the price at the pump issue crops up as any price increase always leads to a spiral of other price increases starting with “transportation” which is dependent on oil and gas, and this “transport” element features in almost all supplies of goods and services. The Government must be reminded that this commodity called petroleum is a national resource, and Petronas — the national oil corporation– is supposed to hold this resource in trust on behalf of the people.
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++++From star.com.my:
Friday October 23, 2009
Govt may be pressured to review prices of petrol
By IZWAN IDRIS
Crude oil prices up 15% since start of October
PETALING JAYA: Rising crude oil prices in the international market may up the pressure on the Government to review local pump prices to rein in the country’s huge fuel subsidy bill.
Crude oil yesterday retreated from a high of US$82 per barrel hit in New York overnight, but remained above the US$80 mark during Asian trading hours yesterday.
At the current level, crude oil had surged 15% since the start of October and more than doubled from a low of US$34 per barrel in March.
The current pump price for the RON95 petrol has been set at RM1.80 a litre since the grade was officially introduced last month.
Prior to Sept 1, a number of select pump stations around Klang Valley were selling the petrol at RM1.75 per litre. The hike was to take into account the higher crude oil price since the plan to introduce RON95 was announced early this year.
However, Domestic Trade, Cooperative and Consumer Affairs Ministry secretary-general Datuk Zain Mohd Dom said last month the Government would cap the RON95 price at RM1.80 for the rest of the year.
International crude oil price was traded within US$65 and US$75 per a barrel in August and September. Crude oil price averaged about US$74 per barrel over the past three weeks of October. Some estimates put that based on the average price, the Government has to fork out 39 sen in subsidy for every litre of RON95 sold at local pumps.
Last week, Prime Minister Datuk Seri Najib Tun Razak said Malaysia spent RM9bil on subsidies for petrol, liquefied petroleum gas and diesel, but did not specify any time period.
“The Government may revamp the existing fuel and food subsidy structure to bring down its budget deficit,” Bank Islam Malaysia Bhd senior economist Azrul Azwar Ahmad Tajudin said.
Malaysia’s budget deficit was forecast to widen to 7.6% this year, but was projected to be lower in 2010 by cutting down on operating expenditure that includes spending on subsidies.
The Government was also reported to be considering “a more discriminatory system” where the bulk of the subsidies would be chanelled to lower income groups.
Crude oil in New York fell below US$81 per barrel yesterday after the US dollar rebounded from a 14-month low against a basket of six major currencies.
“The US dollar is stronger today, that’s why crude is down,” Frank Schallenberger, head of commodities research at Germany-based Landesbank Baden-Württemberg told Bloomberg yesterday.
The US dollar had been on a slide over the past few months as investors’ risk appetite improved amid signs the global economy is recovering.
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