IS PETROL TO BE SOLD AT RM4 A LITRE?

The price of oil hit a new high of US$135 (RM434) a barrel. If petrol is to be sold at full market prices, it could be as high as almost RM4 a litre - about 100 percent above current levels. Currently petrol sells for about RM1.92 a litre, among the cheapest in the region.

Looking from macro aspect, with increased globalization and closer socio-economic ties between countries, the devastating economic effect of the hike in fuel prices is far more destructive. The damages done can threaten not just a single country, but can impact an entire region.

The devastating economic crisis may ripple affects through the global economy especially economic growth. The situation may become critical arise questions about the economic effects of this and other terrible problems face by the world and Malaysia.

As an oil and gas exporter, Malaysia has profited from higher world energy prices, but due to the price hike, petrol, diesel and gas prices in Malaysia will be at an all-time high and rising from now too.

Given the rising trend in the price of crude oil, a political decision could not be put off. The much-discussed hike in fuel prices which forced government to reduce subsidies is by far needed and around the corner.

The move to cut the spiraling bill for its extensive subsidies, which is expected to cost RM56 billion this year. Although experts and politicians have a lot of excellent reasons to explain the price hike, among them blaming mysterious international market forces for increases in oil prices, unrest in the Middle East, petrol-guzzling cars, greed among oil-producing nations and the fall in the value of the US dollar.

Prime Minister Datuk Seri Abdullah Ahmad Badawi said, the international community should look at the possibility of suspending the trading of oil in the futures market to prevent speculative bidding of the commodity. Countries like Japan had taken the lead in instituting such a move for other commodities.

“To prevent speculative biddings, Japan has suspended trading of rice in the futures market. It has also offered to sell rice from its stockpile at reduced prices,” he said in his keynote address at the 22nd Asia Pacific round table here yesterday.

Abdullah said the international community should examine if similar steps could be applied to the trading of crude oil as it was a major contributor to inflation. He, however, recognized that his proposal would require negotiation and agreement at the international level.

Abdullah said the steep rise in oil, food and other commodities required a global response.

Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad said, the new subsidies would be a needs-based system, rather than the current arrangement which lowers the cost of petrol for all users no matter what their income.

The government was considering mechanisms including offering cash payments or setting quotas. The government is initially targeting Singaporeans and Thais who make day-trips across the border to fill their tanks with fuel that is substantially cheaper here.

How about the public transport? Should the accessibility, efficiency and facilities in the public transport system be improved?

Malaysia is far too dependent on oil and it is only going to get more and more expensive. Should we be encouraging our people to reduce their energy consumption? Shouldn't we plan to remove our dependency?

The degree of dependency on oil should be reduced now. We should heading it off by proper planning and look at long-term solutions through alternative sources of energy like solar power, biodiesel and wind farms. We must look for real alternatives now to replace oil not till when it has all run out.