And now, the end is near,
And so I face the final curtain.
My friends, I'll say it clear;
I'll state my case of which I'm certain.
And so I face the final curtain.
My friends, I'll say it clear;
I'll state my case of which I'm certain.
By WONG SULONG and B.K. SIDHU
KUALA LUMPUR: With the festive and holiday season effectively over, Malaysians are facing up to the prospect of some unpleasant news; namely another rise in oil prices.
Last year, the Government increased the retail prices for oil products three times, the last time on July 31, when the price was marked up by 10 sen a litre for petrol and 20 sen a litre for diesel.
At that time the authorities warned Malaysians to expect further oil price increases in the future as the increases imposed so far did not commensurate with the rise in the price of crude oil on the world markets.
As a result the Government had to dig further into its coffers to further subsidise Malaysians for the relatively cheap oil on the retail market. Current government subsidies on oil products are in the region of RM15bil a year.
Since the last price increase, world oil prices have shown few signs of easing up. The price has surged since last December driven by political uncertainties in the Middle East, the nuclear standoff between Iran and the West, and increased consumption due to a bitter northern winter.
With oil prices now back to levels of over US$65 a barrel, private sector economists and analysts say it’s a matter of time before the Government decides on another price increase to alleviate its subsidy burden.
A few months ago, it was hoped that the world oil price would ease a little to average US$40 a barrel for 2006, but several international studies conducted recently predict that the world oil price will remain high for 2006, averaging above US$50 a barrel.
“It’s almost inevitable that it (the oil price increase) will come soon.
“The question is the quantum” one economist told The Star.
“The Government could not sustain the subsidies even be-fore the recent hike in world oil prices. I am surprised at how it is sustaining the subsidies.
“It’s about time retail oil prices are increased to ease the Government’s burden” said the chief analyst of a large Malay-sian bank.
Within the Government there are two views on the prospective price increase.
The majority view is to maintain the current policy of staggered price hikes so that the impact on the population would not be as painful as it would if the Government decides on the full increase at one go – as was the case recently in Indonesia.
However, there is a minority view which is in favour of the Government biting the bullet rather than prolong an unpopular decision.
“It’s never easy. The Govern-ment has to look at the prospective retail oil price increases from all angles – inflation, impact on the poorer sections of society and government revenues – and has to come up with a formula that balances all these considerations,” said the economist.
