Sometimes it’s fun to see how the half-past-six government struggling to find ways to twist the facts again after they shot their own foot. Everyone knows that Malaysia is perhaps the only oil-producing country that charges the highest fuel price on her citizen. Sure, the country’s oil reserve will dry soon and in another 10-year or so, we’ll be begging other oil producer countries to sell their oil to us, so goes the propaganda. Hence, we got to become “prudent” and one way to preserve the wealth is to pay more. Was it our fault that the stupid government spent like there’s no tomorrow in the first place and when the nation’s coffer is running dry, they instilled this fear in order to justify the fuel hike? It was amusing that suddenly the government awakens from their nightmare and realized the subsidy mentality that they had deployed decades ago has grown so strong that it robbed them of five-states and two-third majority in the Parliament.

The country has too many artificial parts. The NEP thing has only enriches a small group of cronies while the rest of the people were left to rot although strangely these same people continue to vote the same corrupt officers to power. The subsidy scheme was drafted in order to jump-start the poor so that they could stand tall on their own feet one fine day. But it didn’t take off as planned and this “category” of people still demands subsidies from gasoline to education. Essentially it has created an artificial demand and supply value chain of which if interrupted could explode like volcano. Ask anyone old enough and they will tell you an engineer 20 years ago has more disposable money than now – with salary package hardly change within the time-span.

As much as the outgoing PM Abdullah Badawi loves to sleep, the people are actually willing to close one-eye if his administration can at least control the inflation. Heck, they’re even willing to close one-eye on the rampant corruptions practiced since the 22-year-rule under Mahathirism. It doesn’t take a rocket scientist to know that any fuel hike would be followed by inflation, what more in a country where enforcement of essential goods are almost non-existent. Not sure whether it was plain stupid or arrogance but the decision to raise fuel price by 30 sen (from RM1.62 to RM1.92 a liter) on 28th Feb 2006 was the turning point to all the havoc. It’s hard to believe that the Badawi’s administration did not know the impact from such an action since he got all the helps and consultations from the 4th-floor-geniuses, fully imported from Oxford mind you.

Climax was reached when the sleepy, clueless and confused PM thought the people would understand him when he decided on the 78 sen (41%) a liter hike on 5th June 2008. All hell breaks loose when the inflation skyrockets. The crude oil prices were at $128 a barrel then. The fact that Petronas, a wholly government owned entity, was reaping easy money during the black oil’s appreciation was swept under the carpet and instead the government launched the No-Holds-Bar campaign focusing on how much the government was subsidizing the fuel. So, instead of performing the simple arithmetic of minus the “extra gains” from Petronas sudden windfall and “add” to the government’s so-called fuel subsidy in order to “neutralize” the situation during such trying time, Badawi’s administration believed it was better to take money away from the struggling citizen than to offend the Petronas major shareholders (which in turns is the government themselves).

But now the fuel price drops like a rock to even lower than the closing price on that faithful day of 5 June 2008 ($127.79 a barrel), naturally people are demanding that the fuel price be lowered to the previous RM1.92 a liter, if not lower. Caught in the middle, the government has no choice but to reduce the fuel price in stages. With such strategy the government can still enjoy the extra pounds of fats (being the difference between the latest RM2.30 and RM1.92 a liter) while can shout that the government has so far reduce the fuel prices “three freaking times” *applause please*. However nobody knows for sure on how the formula on the price reduction was being calculated.

Statistically, if you compare the crude oil prices and the petrol price reduction, you might need to resurrect Einstein to solve the mystery. For example when the crude oil dropped from $127.79 to $114.59 the difference was $13.20 which translated to fuel reduction of RM0.15 a liter. Subsequently the difference of $8.86 ($114.59 minus $105.73) produced RM0.10 a liter reduction. Strangely crude oil differences of $26.78 (from $105.73 to $78.95) only transformed to RM0.15 a liter difference. There might be noises and other factors that the geniuses need to take into consideration but looking at the poor-man model above, it appears that in order for the petrol price to fall back to RM1.90 a liter, you’ve to pray that the crude oil plunges by $48 bucks to $30 a barrel. But, but, but, but that means the global economy would most likely be in Great Depression and chances are high that you won’t have much money to visit the nearest fuel pump.

Nevertheless, the main problem is the food prices remain high despite cheaper petrol and the cycle of blame goes again. The consumers point their finger at operator; the operators blame the supplier; the suppliers blame on transporters; the transporters blame on government and the government points their finger at consumers and consumer groups *gulp*. I guess the government still refuse to acknowledge that once the fire has been started (by themselves in the first place), it’s hard to be extinguished when everyone was happily pointing finger at each other while the victims were crying for help.

Other Articles That May Interest You …

• Flip-flop Badawi to the Exit Corridor – from Hero to Zero
• Currency Traders prepare to dump Malaysia Ringgit
• Forget about oil prices, it’s the Inflation you should worry
• External and internal factors point to gloomy economy
• No further fuel hike for 2008 yet nobody rejoicing?
• Oil price hike – Badawi’s greatest Economic Challenge

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October 16th, 2008 by financetwitter

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