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Friday, 6 June 2008

What's cooking up the world today?

There's one word to describe it. OIL.

There are advantages and disadvantages of raising the price of oil. On 5th of June 2008, 12.00a.m., the BN government has raised the petrol price from RM1.92 to RM2.70, a 78 sen increase. Before the raise, Malaysia have the cheapest petrol price in the ASEAN region, followed by the likes of Indonesia, Brunei, Thailand and Singapore (if I'm not mistaken). Now, at the price of RM2.70, we are behind Indonesia and Brunei but still ahead of Thailand and Singapore in the cheapest petrol category for ASEAN. I have no idea about the petrol prices in other ASEAN countries such as Vietnam, Cambodia, Myanmar, Laos and Timor Leste. So, I'm just singling out the notable countries.

So, below are the advantages and disadvantages of having the petrol price raised from my point of view:

1. Oil's getting scarce and they are the reason for global warming as carbon emission from cars absorbs (is it the right word) into the atmosphere and caused the ozone layer to be thinner. However, that's not the only factor. The excess deforestation also causes the Earth to heat up and enables the UV ray to reach the ground. So, raising petrol prices are good for efforts to reduce global warming and to encourage people to take public transport to travel to work. However, since the 30 sen rise in petrol price last time around, do we see any improvements in public transport by the government? Only those riding buses, taxis and LRTs can evaluate. I myself haven't ridden a public transport since these few years. Did anyone thought of riding a bicycle to work? Save fuel...

2. Well, by raising the petrol price, it can encourage people to modify their lifestyle into a better lifestyle than before. Smokers especially, will be hit badly if their work income is low and they own a car. Having a motorcycle is not that bad but bad budgeting could lead to a cash-flow crisis. Therefore, it can at least curb some of the smokers' bad habit of smoking. However, the petrol price will really hit the poor people whose budgets are really tight even with the petrol price at RM1.92. The poor gets poorer. However, at least the target is on the richer people, who had been enjoying the same "subsidies" as the poor people that I have mentioned. They will feel a bit of pinch by the petrol price.

3. Higher petrol prices mean more government revenue. This extra revenue can be used towards helping the development of the country and the well-beings of the people, as long the leaders are not corrupted. But in Malaysia's case, we might not have the slightest idea whether the BN government will channel the extra RM56 billion to development for the people. We all knew about PM and his son-in-law, Khairy. Projects were privatised, means more rewards for the cronies. Oh well, let the karma law do its work on those who are unfair towards the other. If justice is blind in this world, then justice won't be blind when we reach the court of God in the world hereafter. I hear people say that the extra money means more going into cronies, corruption and white elephant projects. Sounds like political survival to me. And I forgot one thing from this view, the Malaysian DPM said back in May 31st that the petrol prices are not going to go up at all, even by 40 sen. Also, he asked us not to believe the rumour which is baseless. Well, 99% of rumours in Malaysia is true while the other 1% might probably be true too. This statement proves it at midnight, June 5th. Boom! 78 sen increase. Just like that. Boy, we Malaysians are really rumour-conscious, and it always turned out to be true.

4. Raising petrol prices show that we live in the so-called comfort zone for too long. Pampered by "subsidies", we were always angry each time the government raises the petrol price. Then, it recedes. I mean, are we supposed to be angry at the petrol price in the first place. If we want to be angry, be angry at the right things. Such as, why didn't we pressure the PM to reveal the Petronas accounts to show where the revenue goes? Also, why the PM didn't stick to the promise that they won't raise petrol prices? This may cause more distrust among the citizens toward the PM, who is expected to resign this December and hand over the post to Najib. That is, if Anwar manage to take over the federal government with enough defects between now and December. Now, this raise in petrol price taught us a lesson in a way. Finance is always important and planning the finance carefully may enable us to adapt to any worst case scenario, such as the increase in petrol price as it happens.

5. Raising petrol prices may cause a big change in spending behaviour of consumers. It will cause them to save even further and not spend money on unnecessary goods. Saving is one thing, but what will happen to the money flow if expenditures stop? We might see another repeat of the financial crisis in the 1980's as people are afraid to spend so much money in an unstable economy. This rise in petrol price will surely cause other necessities to go up in price. As Bank Negara claims that the inflation rate of Malaysia is in single-digit figures, they might have to think again. I'm sure we must be aware of the subprime mortgage market in the US that is pulling down the world economy. So, if there is no control on world food prices, we might see more starvation of the people, estimated another 1,000,000,000 people would starve as a result of this spiralling food price.

Well, that's it for now. If there is more analysis to come, I'll continue when I have the time. What's your comments guys? I really appreciate your views.

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