My World

Despite the gains by the opposition and promises to reduce the fuel price in Malaysia, it will be hard to do so as there are several external factors in play as well. The current subsidised petrol price averages RM1.92 per litre which is low compared to most places e.g. US at RM3.10 (US$0.98) per litre, Singapore at RM4.40 (S$1.92), Hong Kong at RM6.50 and India at RM3.68 (Rs 46). (Source here).

All along, Malaysia has produced more oil than we consume, thus the surplus is exported and the profits are partially used to subsidise petrol prices. All and well when there is a surplus. As time went by, our oil consumption gradually went up due to an increasing population and growing economy; and this is expected to continue rising.

But our oil production actually peaked in 2004 while our oil exports peaked in 2003 at 362,000 barrels per day (bpd) went down to 251,000 bpd in 2005 and to 228,000 bpd in 2006. (See data here).

At the current rate, we could become a net oil importer as early as 2009 or as late as 2011. What then? There will be no free flow of money from Petronas and therefore not only will subsidies have to be removed, but spending on mega-projects and throwing away of money to cronies will be curbed too.

The point is, it doesn’t matter if we have 3 or 4.5 billion billion barrels of oil left or whether oil price hitting US$100 a barrel will translate to more money. What matters is whether we are producing more than we consume. When we do that, it will be impossible to continue offering subsidies. Hence, be prepared for petrol price to be in line with the rest of the world. A gradual increase of petrol price to RM4 to RM5 per litre can be expected over the next two years, no matter who runs the country.

So, what’s the solution? After exploring many possibilities, my conclusion is to live more simply – drive less, walk, cycle and car-pool more. Petition our new and eager MPs to improve public transportation, improve our railway system, and rebuild neighbourhoods to ensure most amenities are within walking distance, etc.

Globally, many solutions have been proposed to use various alternative energies but most of these are not feasible in the short-term due to scalability or deployment factors. For example, the much touted bio-diesel is extremely polluting and even if all the forests in the world were converted into plantations producing biodiesel, it won’t meet half our current needs.

Furthermore in biodiesel made from palm oil, only 5% of it is palm oil, the rest is diesel from conventional oil. So palm oil will not replace diesel completely. You can read more here and here.

So, it’s best to be prepared for change in lifestyle – this applies not just to Malaysians, but to all oil-dependent societies.