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The Truth About Fuel Subsidy


This is a great piece from Kickdefella. He wrote a lengthy essay to explain the truth about fuel subsidy. I am reproducing his essay here which was written in Bahasa Melayu after translating it into English. My sincerest apology in advance if I did a bad translation job.

Hassan, Husam and The Truth About Fuel Subsidy

Last night, Hassan Marican appeared on National Television willingly to bare all about Petronas. Unfortunately, the only answer he should have given last night to those stupid panels (and moderator) was “Bloody hell, what a stupid question! Go and **PAKLAH** yourself la!” but he remained calm though.

Most probably the instruction was to grill him as though the increase of fuel prices is all Petronas faults.

Meanwhile, Last week, before leaving for Dubai, Dato’ Husam Musa called for a Press Conference to reveal all the facts and to justify his claim that it is not necessary for the government to increase fuel prices. It is also to give his insights on how actually it is possible to reduce the fuel prices.

Unfortunately, none of it ever came out in the mainstream papers although we have about 30 journalist and broadcaster packing the small office. The TVPAS reporter came ten minutes later and arrogantly left the room because the session already started. As a result, the session goes unrecorded. It was a total blackout on what was said and PAS official organ too play a role in it.

I have written in this blog all the facts and have published the figures to justify the claim where many are more interested to use rhetoric and to show the slimy strength by demonstrating and cause misery to the already much affected taxi drivers and shoppers in KL.

To some politicians, it is easier to get your photos and story published in newspaper by behaving like hooligans in public places yet when you got the chance to speak up, only buckets of nonsense do come out.

Today I will continue with my essay and we will discuss how it is possible to reduce the price of fuel prices and to put a stop in the already escalating cost of living.

Government Has Not Been Truthful Regarding the Fuel Subsidy

The government claimed that it would spend close to RM40 billion (I read somewhere it is RM56 billion??) this year for fuel subsidy. This is actually a lie, or an attempt by the government to mislead the people.

The facts are:

• Government does not come up with any cost, even one cent for fuel subsidy.
• Fuel subsidy is not included in government’s expenditure
• There is no actually no fuel subsidy. Zilch. Nil.
• The government only spends money for toll subsidy, public transportation subsidy, food subsidy and other subsidies not for fuel subsidy.

Because of that, the following statement by the Second Finance Minister Nor Mohamed Yakcop is not accurate and intended to mislead the people.

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Data provided by Treasury Malaysia clearly not as mentioned by the Second Finance Minister, Cabinet Ministers, Abdullah Ahmad Badawi and also Khairy Jamaluddin during Umno General Assembly 2007.

Data from the Treasury show the following information:

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According to the Treasury Report in Table 6.3, Federal Government Operating Expenditure, total subsidies spent in 2007 is RM12.1 billion which is 9.8% from RM124 billion government operating expenditure. In 2008, total subsidies is predicted to be RM10.1 billion or 7.8% from the total RM129 billion government operation expenditure allocation that was approved in 2008 Budget.

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This clearly shows that expenditure to manage fuel subsidy is never included in government expenditure because:

• Operating expenditure data by Treasury shows a lesser amount and obviously not sufficient to sustain the total subsidies which allegedly estimated at RM40 billion.

• Total fuel subsidy is not included in other data inside government’s account as recorded in Treasury’s
Annual Report.

So, where the subsidy comes from? The fuel subsidy actually never exists. Fuel for domestic use is obtained through:

• Crude oil exchange mechanism.
• 400k barrels of higher grade crude oil ‘Tapis Blend’ – highest crude oil grade will be exchanged in global market with domestic crude oil demand.
• This crude oil after being processed into petrol and diesel is sold to people at price determined by the government.
• The government gets net profit (because the government never spends anything) from the tax paid by petroleum companies, petrol stations and other suppliers.

Is it true Malaysia’s crude oil reserves will last in another few years?

Lately, the people were told that Malaysia’s crude oil reserves won’t last much longer and this country will be a net importer of oil. This is used by the government to justify the increase of fuel prices and cut ‘fuel subsidy’ to prepare the people with market price when the country starts to import oil for domestic use.

However, Petronas 2006 Annual Report recorded that Malaysia’s crude oil reserves can last until 2024.

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Hassan Marican, Acting chairman, President and Chief Executive Officer of Petronas meanwhile explained to the media that in 2011, Malaysia will become net importer of oil because the domestic demand will exceed the country’s crude oil output. This means that domestic demand for crude oil will be more than 700k barrels per day. But this is in 2011 and coming, the country will still able to produce 700k barrels of crude oil per day, which he never refuted.

According to Petronas Annual Report since 1980, Malaysia’s crude oil reserves is increasing and not decreasing. In 1980, it was reported Malaysia’s crude oil reserves stand at 3 billion barrels, and since then we had produce more than 4 billion barrels and up to now, we still produce around 650k to 200k barrels per day for 365 days and this at this rate we can last for another 20 years.

The fact is that this country’s crude oil reserves are increasing and not decreasing. In 2008, we have crude oil reserves estimated at 4 billion barrels and Malaysia is placed at number 28th among countries in the world with largest oil reserves.

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Malaysia’s crude oil reserves will not finish so soon. This is because Petronas, a petroleum company owned by the rakyat invest hundreds of million every year for oil exploration all over the world. From the investment, we found new reserves and according to the same report, the reserves replacement ratio currently is 1:1.8 liter. This translated as, for very 1 liter used, Petronas found 1.8 liter new reserves. This means the replacement rate is higher than the usage rate.

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Fuel Price Reduction Is Not Impossible

To optimise profit from crude oil, the government does not have to increase fuel price. The government actually can optimise its profit by reducing the fuel price at the same time.

Reducing the Usage of Petrol and Diesel

Fuel price in Malaysia is the highest among oil producing countries. Based on population of 26 million and crude oil output rate at 650k-700k barrels per day, Malaysia has a very high output ratio but this has not benefited its population which is far lower than the rest of the oil producers.

Petrol and diesel priced should be reduced and this is possibly done. Among the measures to reduce the price are:

Changing from petrol and diesel usage to natural gas for cars or NGV (Natural Gas Vehicles) should be done because of these factors:

• Malaysia is the 13th largest natural gas reserves country in the world. In 2004, Dato’ Mustapha Mohamed announced that Malaysia’s natural gas reserves is estimated at around 89 trillion cubic feet.
• The government encourages the usage of NGV because it is cleaner and environmental friendly but never make it compulsory for every petrol station to provide this service. As a result, there are limited number of NGV stations and mostly only available in Klang Valley.
• Wide usage of NGV by vehicles will reduce the demands for petrol and diesel.
• Malaysia can sell more crude oil and this will bring more profit to the country.
• Price of petrol and diesel can be further reduced using this extra profit

National Petroleum Advisory Council

National Petroleum Advisory Council (NPAC) should be formed again to gather experts that will involve in planning the energy usage and shaping efficient energy policies for the country. NPAC was formed together with Petronas before but it does no longer exist now.

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Petronas reaps high profit each year. As a company that is tasked to manage the national treasure owned by the people of Malaysia, Petronas organisation structure should focus on guarding the people’s interest. It is important NPAC to be revived, by choosing credible candidates and not for the sake of ‘political selection’. In other words, revival of NPAC means nothing if it is used to for political mileage by ‘expired’ UMNO politicians such as Abdul Rahim Thamby Chik or Zainuddin Maidin.

Check and Balance in Petronas

Currently, Tan Sri Dato’ Mohd. Hassan Merican holds the three highest posts in Petronas – Acting chairman, President and Chief Executive Officer. Before this, two of these positions were held by different individuals.

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Without trying to discredit the achievements and success brought by Tan Sri Dato’ Seri Mohd. Hassan Marican since helming Petronas, by holding to these three positions, Tan Sri Dato’ Seri Mohd. Hassan Marican becomes too powerful and this hampers check and balance inside Petronas and affects the transparency in managing Petronas.

Conclusion

People should enjoy the benefits of prosperity from the global oil price increase. As a net exporter of crude oil, the oil price increase should be translated as an additional income to the country.

Unfortunately, not only people cannot reap the benefits from the country resources, people are burdened with the fuel price increase which generated ripple effects to the price of consumer items.

Based on the arguments and data provided, it proven that the government decision to increase the fuel price is baseless.

This is the proof of poor planning and management under the government of Prime Minister Abdullah Ahmad Badawi. People should insist for their rights to enjoy benefits as an oil producing country and call the government to reduce the fuel price. If this is not carried out, the country’s economy will decline and people will suffer not only the direct consequences but also need to face the social problems arise from it.

Give Back the People’s Rights Now! :arrow:

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22 Responses to “The Truth About Fuel Subsidy”

  1. Allen Taylor wrote on Jun 19, 2008 at 4:00 pm

    Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

    [Reply]

  2. angeles wrote on Jun 19, 2008 at 4:28 pm

    Sik kerja ka?? 😛

    OK la, since u so bersusah the payah mentranslate, I’ll read it.. later 🙂

    [Reply]

  3. |1f34|-|1r3 wrote on Jun 19, 2008 at 4:50 pm

    haha..aku dh post dh yg nii…tp copy n paste baik punya la..xde masa siot nak translate..ni ko translate manual ke guna software pape ?? 😳

    [Reply]

  4. bongkersz wrote on Jun 19, 2008 at 5:04 pm

    manual lah bro 😛 haha!

    [Reply]

  5. bongkersz wrote on Jun 19, 2008 at 5:06 pm

    wah.. pandai bahasa swak! kerja… tapi.. time lunch i did that 😀

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  6. suituapui wrote on Jun 19, 2008 at 5:10 pm

    Quite sometime ago, I brought my family to National Science Centre…in the middle of nowhere and when we wanted to go back to KL, we could not find transport. Then I saw in the parking area…lots of taxis! I asked the security guard and they told me those cabs belong to the officers working at the centre. Because the cost of living in KL is so high, they have to drive taxis at night to supplement their income and support their families.

    The situation is such not only in our country but throughout the world e.g. in New Zealand, the price of bread was increased by 50% overnight! Perhaps we should think about HONEST ways to earn some extra income to make ends meet e.g. in my case, I do a bit of tuition or my pension will defintely not be enough. I know the private universities in Kuching will employ professionals to give lectures. Otherwise, we will be just like dogs barking at the moon!!!

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  7. |1f34|-|1r3 wrote on Jun 19, 2008 at 9:23 pm

    fullamak..giler rajin wei..kalau aku soh translate satu artikel ala2 panjang tuh..berapa ko nak dibayar ?? 😀

    [Reply]

  8. clement wrote on Jun 19, 2008 at 9:26 pm

    soooo long ah

    [Reply]

  9. |1f34|-|1r3 wrote on Jun 19, 2008 at 9:28 pm

    yeah..i agree…definitely the world is going crazy nowadays but for a small country like us with diversified source of food and with our own oil supply, we should be able to beat it

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  10. mob1900 wrote on Jun 19, 2008 at 9:58 pm

    Good work guys,
    both you and |1f34|-|1r3 has been promoting Sheih and Husam’s hardwork. A good written piece deserves to be read by all.

    [Reply]

  11. zewt wrote on Jun 19, 2008 at 10:35 pm

    i wonder how it feels like to be hassan merican now… under all the limelight. wonder if he will lose his temper with his boss.

    [Reply]

  12. bongkersz wrote on Jun 19, 2008 at 11:31 pm

    must be tough.. in his position. he’s a cool and steady guy really. but his boss is not. ➡

    [Reply]

  13. bongkersz wrote on Jun 19, 2008 at 11:38 pm

    yeah dude, a good written piece deserves to be read by all. a good ‘photo-chopped’ piece of art deserves to be viewed by all too :up: hehe

    [Reply]

  14. bongkersz wrote on Jun 19, 2008 at 11:39 pm

    ko ada aper nak ditranslate? belanja makan lah 😀 hahahahaha!

    [Reply]

  15. bongkersz wrote on Jun 19, 2008 at 11:39 pm

    read clement.. read.. don’t be lazy. 😆 😆 😆

    [Reply]

  16. bongkersz wrote on Jun 19, 2008 at 11:40 pm

    we definitely able to do something about it. on paper, we have all the resources.. something must be wrong somewhere. it doesn’t make sense at all.

    [Reply]

  17. bongkersz wrote on Jun 19, 2008 at 11:57 pm

    then we will be working like dogs? 😀 the situation is not limited to this country yes, and it is happening globally that we all understand. the difference is, how much the government is doing to help the people, instead of telling us what to do. so far, we see no concrete actions by the government to alleviate the tough life we are living in. implementing half baked measures, paying lip service is not enough. with all the arguments, data and charts thrown around it is clear that some groups of people running the country never really care what happen to us ➡ all busy playing politics. the government is busy saving their asses before being booted out, loot while they can and the oppositions trying to make themselves as the champions of people by organising protests and rallies, instead of engaging the government directly on the issues.

    there is only as much we as citizens can do. working 2-3 jobs? you are retired, sure you have the leisure of having more time to do things. if i moonlight, i doubt i can cope with my current job 🙄 yes, i am looking for extra income, any offer? 😆 😆 yea, i have a friend/coursemate working as a lecturer here in one of the college, she did mention to me about that 🙂 i better not go around corrupting innocent minds.. and i doubt they hire a botak, tattoo-ed gangster looking guy. (quoting you.. nyahahahhaha!)

    [Reply]

  18. JiNG wrote on Jun 20, 2008 at 12:31 am

    subsidi or not, tats not the matters.. its shouldn’t be called as subsidi in the first place… Its the country’s property.. the oil is belong to all.. The country should take the oil , process and give it to us to use it.. but they choose to export it out with a reason that our oil got better quality and we can make money with them.. so we import the lower grade oil from other country.. But shouldnt we get the profit from the export instead asking us to pay more for the imported oil?? shit man.. trying to play around with our mind.. shit pak lah.. dont ever vote for BN anymore..

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  19. bongkersz wrote on Jun 20, 2008 at 12:28 pm

    hey bro! where were you lah? missing in action? 😛 how’s life?

    the annoying thing is not the price hike, it is about the government never tell us the truth about oil subsidy and giving us funny numbers to justify the hike. we don’t like to be treated as idiots. :vangry:

    [Reply]

  20. wawa440khz wrote on Jun 25, 2008 at 9:17 pm

    impressive presentation bong….we need those to understand the facts..i am just started learn to read annual report(hehe for buying stock)…
    100% for sure, we will still making profits from oil even we will no longer become net exporter…we export high grade oil and import low grade oil…if there is always different in the prices between low and high grade..we are profiting…and 100% i am doubt on those oil resource facts…number of oil drilling construction platform are increasing annualy, aged platform are a bout to be renewed…there no reason of building more drilling machine while the resources is running out..it doesn’t make any sense…the high fuel oil was man made..not supply and demand….
    do remember one thing facts…we are oil exporter!!!

    [Reply]

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