Fuel Hike - There will be inflation and the standard of living will go down

“The Government has now announced an increase in petrol price by 78 sen to RM2.70 per litre, an increase of more than 40 per cent.

I may be mistaken but there seems to be fewer vehicles on the road today. But obviously that is not all that will happen. All other consumer goods, services and luxury goods would increase in price.

The cost of living must go up. Put another way there will be inflation and the standard of living will go down.

Obviously our increase in petrol price is far less than in the United Kingdom or the United States. But our per capita income is about one-third of theirs. In purchasing power terms our increase is more than in the UK or the US.

The increase hurts but the pain is greater not just because of the increase percentage-wise is higher than in developed countries but because of the manner the increase is made.”

Tun Dr. Mahathir Mohd

June 5, 2005

Malaysians know that in the 22 years as PM, Mahathir never imposed an exorbitant hike on fuel price. He understood its implications and his responsibility to the people. Unfortunately Abdullah believes only his rhetoric. On Saturday he said ‘steps to be taken to ensure prices of essential goods remain affordable”. Even before the 40 per cent hike, price of rice, a staple food of Malaysians, went up by almost 50 percent. Domestic Trade Minister Datuk Sharir is reported to have assured Malaysians that prices of fuel will stay until March.

After watching the events of the past 10 days Sharir’s assurance is unbelievable.

Maintaining the subsidy would not hurt the Government finances

“Roughly Malaysia produces 650,000 barrels of crude per day. We consume 400,000 barrels leaving 250,000 barrels to be exported.

Our 250,000 barrels of export should earn us 250,000 x 100 x 365 x 3 = RM27,375,000,000 (twenty seven billion Ringgit).

But Petronas made a profit of well over RM70 billion, all of which belong to the Government.

By all accounts the Government is flushed with money.

But besides petrol the prices of palm oil, rubber and tin have also increased by about 400 per cent. Plantation companies and banks now earn as much as RM3 billion in profits each. Taxes paid by them must have also increased greatly.

I feel sure that maintaining the subsidy and gradually decreasing it would not hurt the Government finances.”

Tun Dr. Mahathir Mohd

June 5, 2008

9^th June 2008