Riding the Wave of Petrol Price Increases

Labuan actually experienced a jam!!! And it’s on a non-holiday too!!! Shock!!! Horror!!! Terror!!! Why? Simply because the dwellers of Labuan Island were scrambling their cars to the petrol kiosks for re-fills. A rise of 0.78 cents or 40 % from RM 1.92 a liter for petrol is a MASSIVE increase (especially when the previous price hikes were only at the maximum of 30 cents). Well, I can’t say it was a surprise as around the world petrol prices were shooting up faster than New Year’s fireworks, and Malaysian petrol prices were kept at the region of RM 1.92 a liter for most of the time due to the infamous petrol subsidies. But as the government kept crying like a baby that they can’t take it no more with the subsidies (the Treasury claims that it had cost the government RM 45 billion alone this year), the price hike was bound to happen. It was only a matter of when, and by how much.

But things could get a lot worse. The word from our Government is that they intend to bring fuel prices in-line with global market cost. Now you consider that the market price of crude oil is sky-rocketing daily to new levels of the stratosphere, a RM 0.78 cent increase is merely a tiny ripple on a global perspective. Crudely-speaking (pardon the pun), things could get A LOT worse. Remember that not too long ago that the Government were saying an increase would be in August this year? Well, it's not August yet and already an increase had occurred. My point being, in August, there could well be another increase if their alignment in global market cost of petrol is true. In the long-run, we could well be seeing another increase to RM 3 per liter of petrol...

The Government’s defense to the increase is obviously the global skyrocketing of oil prices, which is at most out of their control. But they also keep saying that prices of petrol are the cheapest in the Asian region. Indeed this is true. But, have the people realized that in most Asian countries, they do not need to pay toll for their use of highways? We Malaysian pay through our noses just to commute to our workstations on time, but realistically speaking, do we have any choice? Let’s not even start on our public transportation woes, or even our rapidly diminishing options of toll-free roads that is silently eradicated on the pretense of development. My point is, I’m not honestly against the petrol price hike, but at least provide us with some notion of an option not to utilize petrol. Car-pool? You and I know how badly that fared, and how inconvenient it was. Hybrid cars? A good and environmentally-friendly option, but the petrol price increase would effectively place it on the high-demand list, hence causing its price to increase wouldn’t it? Again, back to square one. The only feasible alternative I see is public transportation, but a massive overhaul is needed if it is truly to become a viable option to the mass public. We are light-years away from the efficiency and convenience of our Asian counter-parts like Singapore and Hong Kong. So in the meantime, what options do we have but to bite the bullet hard and ride the tidal wave of consequences from the petrol price hike. We got no choice, our balls are in their hands.

Yes, there will be consequences from this petrol price hike. As you might have guessed, once petrol increases, so does everything else. According to the Domestic Trade and Consumer Affairs Minister Shahrir Abdul Samad, national inflation rate will likely to hit 5 % from the after-shocks of this price increase. A brief search on the net showed that national inflation was only at 3 % (April 2008), which was a 15-month high. Forecasts for the year before the price hike announcement was only at 2.5 %, hence we could see a doubling effect on all initial price increases (i.e. a RM 0.10 cents increase before price hike could now be RM 0.20 cents).

We were riding on a wave of new rejuvenation for this country, such as the rally of the stock market early this year. But now, the engines of reinvigoration would probably stall and the momentum of growth will slow further. The Central Bank has cut our economic growth forecast from around 5 to 5.5 % this year from an initial 6.5 to 7 % forecast. Couple this with our recent political turn-around that will take its time to settle-in, we could yet be experiencing minimal growth for this year. So dear Malaysians, it’s high time to put on your saving caps because it’s going to rain HARD.

Interesting times indeed for us Malaysians, but more interestingly will be how well our Prime Minister, Abdullah Ahmad Badawi will face these challenges considering he is already at chest-deep in political turmoil and fighting for his survival. Even with their recent announcement of offering yearly cash rebates of up to RM 625 for owners of cars that is up to 2,000 cc in capacity that could just be seen as mere sweeteners, but the overall cause and effect for all Malaysians involved in this recent petrol price hike may just be too bitter to bare.