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Petrol Subsidy cut totally beginning June 2015. Get ready.

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Today, a friend said that she read online that from June 2015 onwards, there would be no more petrol subsidy. She was upset that the subsidy would be no more. After all the world oil prices are going down, why can’t the government just maintain the same amount of subsidy? Many people argued that there were so many governments which were reducing petrol prices because the world oil price is going down, why is our government different? Seriously, are all these countries’ oil prices also under subsidy? I do not need an answer. I have it and if you insist you are right, I will also insist I am right.

Oh yeah, as usual, the argument is that with the removal of subsidy the property prices would increase. If you look at the actual % of increase versus the actual % that petrol is actually involved in the construction of houses and the property buying transaction numbers continue to be low, the developers may be absorbing this slight increase easily. My industry friend pointed out to many one developer who was offering rebates and discounts, so much until the buyer pays virtually nothing to buy a new property. As for secondary properties, surely the price would remain the same, so what’s the argument that petrol price increase meant that property prices would increase? Just remove it, and let one time price adjustment happens. Then, whoever tries to increase prices in future better think of NEW reasons instead if the petrol price does not change. If the petrol prices drop, then they BETTER get ready to reduce their prices too. That’s what I call full transparency as advocated by many.

oil conflictAs for oil prices movement, look at the chart. The volatility in prices are more of speculation instead of anything else. Due to such volatility, any country which subsidises petrol meant that their budgets will always receive low ratings from any rating agency. How can you say I will set aside RM20 Billion for petrol subsidy when you cannot even control the oil price movement?! However, a responsible government should subsidise its poor people who really needs this, at least for now since MRT is not yet ready. As for ‘sponsoring’ all the rest, including myself, I think it should at max a flat rate. If subsidy is removed today, I will have to pay an extra RM45 – RM55 per month based on 1,500km per month.

Get ready, it’s coming whether you like it or not. If you are honestly worried and you drive a 1.6 litre car, just changing to a 1.0 litre economical car would save you more money than the removal of subsidy. This can be proven easily by calculation. Enjoy your drive.

written on 26 Oct 2014

Next suggested article: Standard & Poor’s rating for Malaysia, subsidy and competitiveness

 

 

 

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