Fuel Prices Hike – Can You Blame PM Najib Alone?



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Sep 09 2013
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When former prime minister Abdullah Badawi did the unthinkable back in June 2008 by hiking the fuel price (RON97) by a whopping 40.62% from RM1.92 a liter to RM2.70 a liter, all hell breaks loose. It was such a huge screw-up that Badawi administration had to pacify angry Malaysians by “reimbursing” RM625 cash rebate for cars below 2,000-cc and RM125 for motorcyclist. The crude oil price was about $127.79 per barrel when Badawi took that infamous leap of faith (*grin*).

 

RON92 was not spared either – it was hiked to RM2.62 from RM1.88 a liter. Most motorists were using the better quality RON97 back then. In order to “migrate” consumers from RON97 to a cheaper alternative, the Malaysian Government phased out RON92 and introduced RON95 as its replacement on Sept 2009, when the global crude oil was at about $70 a barrel. Since RON97 and RON95 were priced at RM2.05 and RM1.80 respectively, consumers were successfully forced to use the lower grade RON95 hence making it looks “cheaper”.

Fuel Hike - Car Long Queue

Ever since PM Najib Razak took over from Abdullah Badawi, he dares not play around with fuel prices. The price of RON95 was left untouched relatively. On Sept 2nd 2013, Najib administration increased the RON95 petrol and diesel prices by 20 sen a liter to RM2.10 and RM2.00 respectively. RON97 was also jacked up by 15 sen two days later to RM2.85 a liter. It that was not enough to send angry average Joe and Jane criticising the prices increase, Najib administration was said to be toying with idea of bringing back the phased-out RON92 to the stations.

 

Petrol stations nationwide would have huge problem accommodating additional type of petrol in offering RON97, RON95, RON92 and diesel. Thus, it is highly likely that consumers would end up with RON97, RON92 and diesel – the status quo as of 2008 – if the government indeed plans to implement such measure. Is this another ploy to force consumers to use more expensive RON97 since lower octane RON92 could affect engines in long term? Ironically at RM2.85 a liter when global crude oil is at about $110 a barrel, the current scenario is like a mirror of what happened more than 5-years ago, when Abdullah Badawi hiked the prices.

Malaysia-Petrol-vs-CrudeOil

Here’s the fun part – when Badawi increased the fuel prices in 2008 in the name of “Subsidies Restructuring”, the government was saving a whopping RM13.7 billion. There’s almost zero improvement in public transportation since 2008 so where have the RM13.7 billion saved gone to? As the present government continues to trim its subsidy on fuel, the saving grows but unfortunately people do not see any improvement in transportation or any other sector for that matter. The joke on the street – PM Najib is worse because there’s no cash rebate when the RON97 price now is the same as in 2008.

 

PM Najib, who once told people to change their lifestyle 5-years ago after the fuel hike, is now facing his own biggest economic challenge. Fitch Ratings cut on Malaysia’s sovereign debt to “Negative” from “Stable”, US Federal Reserve possible tapering, Syria military strike, India and Indonesia currency weakening and whatnot are not helping the already gloomy situation. This fuel hike is just the first bullet fired to increase the country’s coffer in order to repair its huge RM500 billion (and counting) debts. There’re more coming – electricity hike, healthcare restructuring, GST, income tax restructuring and so on.

Malaysia Government Gross Debt 1990 - 2013

The chain-reactions from the fuel hike has already began. Despite what some silly politicians’ assurance that price of goods and services will only increase by 1%, rest assure that inflation will sweep across the board. It’s a matter of time before Bank Negara (Central Bank) increases the benchmark interest rate to rescue inflation and weakening local currency. And we have not even talk about property bubbles as the process kicks in. But is it fair to put the fuel price increase and the subsequent chain-reactions on PM Najib Razak alone?

 

PM Najib actually inherited the present distorted subsidized fuel prices from former PM Mahathir. Both Najib and Badawi inherited this “artificial” competitive economic structure from Mahathir. Mahathir creatively adopted fuel subsidies method in 1982 to push the local industrial and business infrastructures. Driven by fuel subsidies, Malaysian goods appeared to be cheap to produce but once lifted, it would not be able to compete internationally. What used to be meat has now become poison to the present government, when global crude oil prices increase, the subsidy burden increases accordingly.

Petronas_Cumulative_Gas_Subsidy_1997-2010 Petronas_Gas_Subsidy_Allocation

Some said Mahathir had foresight for transforming the country’s resource-based economy to an industrialised nation. But could he be driven by a great vision or merely driven by a grand ambition to enrich himself and his family members? Compared to first PM Tunku Abdul Rahman, Mahathir is definately not a noble statesman. Compared to second PM Abdul Razak, Mahathir is definitely not a genius. However, compared to all the past prime ministers, Mahathir is definitely the richest of them all. Come-on, if his son makes it to the Forbes as a billionaire, do you really believe Mahathir himself is worth a couple of millions only?

 

Actually people accept the fact that eventually the fuel subsidies have to go. They’re taking the pains of the wrongs done by the BN-led government in this fuel-subsidy fiasco. However, people are pretty upset about the manner the fuel price was hiked – last minute announcement just like a mice stealing your cheese. People also cannot stomach the way BN politicians rubbed salt to the injury – that the 20 sen price hike will only constitute 1% of goods price increase. Some of them even went the extra miles to insult peoples’ intelligence by saying the fuel price hike was to help the poor (*tongue-in-cheek*).

BN Supporter - Fuel Price Hike

The biggest problem with Najib administration in justifying the fuel price increase is its silence on annual RM26 billion corruption, billions in subsidy to IPPs, not to mention PMO’s (Prime Minister Office) mind-boggling expenses costing a cool RM14 billion annually. At last, voters who voted the BN (Barisan Nasional) into the government recently have something to cheer and should give a round of applause to themselves for this mystery gift (*grin*). They should not be overly upset as there’re more generous freebies to be given away in months to come – courtesy of Barisan Nasional.

 

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Comments

I wonder whether it will be CHEAPER to do away with the subsidies? Imagine we have a full ministry in charge of subsidies (1 minister + 2 deputies + all the civil servants from federal aright up to the district), how much are we paying for this ARMY of civil servants? Pay + allowances + perks+ pension etc……how many billions are we spending in A YEAR?
How much are we subsidizing the Thais, Philippinas, Indonesians + SINGAPOREANS( believe that?) through smuggling, whether petrol, diesel, flour, sugar, cooking etc….? Even with an army of enforcement officers, these smugglers are always ahead every step of the way.
How much are we losing on tax revenues?
We do not need these subsidies if the govt is PRUDENT in its spending!

Good article. Very informative.
BN is now a curse bearing heavily on us but we still have 47% backing them!
For how long more?
Anwar’s sodomy charge is on. Why he did not sue the government for a hefty sum the false charges put up against him in the first instance and the sufferings he had gone through?
If he had,he would have deterred BN putting up this second charge against him; probably BN would have lost the election long ago and we would not have suffered this present predicament at all.
Sigh!

Hi Bro,

Gua caya sama lu la….

Yo bro! Where did you get the RM28 billion corruption figure from? You picked it from the air?

Or is it from Lim Guan Eng and Lim Kit Siang?

In parliament these two donkeys were asked where dis they get the figure from? They answered form the Auditor General Report. When AG was asked, he said no where in the Audit Report mentioned RM28billion corruption.

Then finally we figured it out where this lie started. It was from an editorial piece by The Star newspaper which projected that if 10% of federal budget went to corruption, RM28 billion was lost! No statistics, no proof were given. It was just an opinion.

But true to their habit of manipulation, Guan Eng and Kit Siang used the figure to prove there was RM28billion corruption in this country.

And now you perpetuated the lie. Congratulations for being in the same eague as the Lims.

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