Will we ever do away with subsidy?

As a young professional observing the current political climate, I am saddened. Not because of who is right, who is wrong, what should or should not be done, to build or not to build. Call it weak leadership, call it whatever fancies you. I call it lack of faith for the administration that has won the hearts and minds of the people, the administration that has won a strong mandate from the people during the last election.

2 years of development cannot be compared to 22 years of progress. Nation building is not something you can pick up overnight. People were embracing the change of the guards, now we hear otherwise. Why? Oil price? Who controls that? Does MOF have a control of the global oil price? Does the Government have a say in the war in Iraq and the anticipated invasion of Iran that could further spiral up the price? Oh I forgot, we have to cater for the majority of the Malays and the people who do not want to accept this reality bite and continue to pound the Government for more subsidies. Sure, let’s just squeeze money from our Fortune 500 company for our daily consumption of petrol at the expense of expanding its operations worldwide to compete with the likes of Exxonmobil and Chevron Texaco.

Life in the ol’ 1971 was honky dory with petrol at US$3.21/barrel. Now it is a whopping US$73.53/barrel for Brent Crude Oil as of 4^th July 2006. How has this happened? The recent increase of petrol price was mainly due to:

• Demand of 82.5million barrels per day in 2004 is almost equal to the supply of 83 million barrels per day today.
• High growth causing high energy consumption in China, India and the US
• Instability in Iraq, Nigeria and Venezuela, which are significant contributors of OPEC
• Hurricane aftermath in Texas and Mexico

Although we are not a member of the OPEC, we export almost everything that we extract because they are high grade stuff and import for local consumption. In addition, Malaysia will be a net importer by 2010. However, our price at the pump is still competitive compared to other SEA countries:

Country	RON97 RM/Liter	RON92 RM/Liter	DISEL RM/Liter	LPG RM/kg
Malaysia	1.62	1.58	1.28	1.45
Thailand	2.29	2.21	1.82	1.65
Singapore	3.76	3.48	2.36
Phillipines	2.07	2.04	1.78	1.25
Indonesia	1.7	1.64	0.86
Brunei	1.2	1.18	0.7	1.38

One can agree about purchasing power and income per capita of these countries. Let's not get to that yet since I went to Engineering school.

This is what we would be expected to pay at the pump without subsidy:

As of 31 July 2005	Cents per liter	Cents per liter	Cents per liter
	Peninsular Msia	Sabah	Sarawak
Petrol (RON97)
Product cost	164.21	164.21	164.21
Operating cost	9.54	8.89	8.13
Margin	4.45	4.45	4.45
Petrol station commission	8	8	8
Sales Tax	58.62	58.62	58.62
Price	244.82	244.26	243.41

Don't forget also that the Government pays half of our cooking cost at home by topping half of the cost of a tank of LPG.

We shouldn't be taxing Petronas for making ridiculous profit, we should tax the oil majors more for doing business in Malaysia. Which company again gave it's retiring chairman a US$357M retirement package. Sounds like a developing country's GDP.

Let's give Pak Lah a break. He has a damn big pair of shoes to fill in. Let's give our Ministers a break. I mean really, should they spend more time compiling answers or should they start cranking up RM9 which is long overdue?

Signing off
Submariner_8