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Thread: Fuel subsidies cost RM16b

  1. #1
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    Fuel subsidies cost RM16b

    Another petrol price hike in the cards? Even the strengthening of the ringgit may not be sufficient to keep the petrol price under cover...

    Monday July 25, 2005
    Fuel subsidies cost RM16b

    PETALING JAYA: Fuel subsidies will cost the Government RM16.8bil in lost revenue or 60% of the development budget by the year’s end, said Minister in the Prime Minister’s Department Datuk Mustapa Mohamad.

    This, he said, represented 14% of the nation’s total budget.

    “The public cannot depend on subsidies forever. One day it has to be abolished and we must be prepared to accept the changes and face the world without it,” he said.


    Datuk Mustapa Mohamad... 'We need to find ways to reduce dependency on oil, avoid wastage and switch to alternative resources such as gas and bio-fuel'
    Subsidies, he said, was not the most affective way to distribute the country’s wealth for to rely permanently on it would be unhealthy.
    “However, if the subsidies are withdrawn completely, the Government will do it in such a way that does not burden the people,” he said.

    Mustapa said one of the ways to reduce the dependence on subsidy would be to change one’s mentality, as “we need to accept the fact that natural resources such as oil will run out in 18 years.”

    “We need to find ways to reduce dependency on oil, avoid wastage and switch to alternative resources such as gas and bio-fuel,” he said.

    Quoting an Economic Planning Unit report, Mustapa said: “It is estimated that an additional RM1.5bil worth of subsidies would be required for every US$10 increase in oil price, should local prices of petroleum, diesel and LPG remain the same.”

    Crude oil prices, which recently hovered around US$55 to US$60 per barrel, was US$58 on Friday.

    The report said the “net effect of a US$10 increase in oil prices would be a reduction of real domestic product by 0.4% to 5.2% for this year and 2006.”

    This would have a negative impact on the manufacturing and services sector, among others.

    Mustapa said the Government would study the mechanisms and identify the most suitable method to ensure that fuel subsidy, such as diesel, would benefit those who qualified for it, including public transport operators such as bus and taxis, fishermen and river transport operators in Sabah and Sarawak.

    Petronas, he said, would provide more natural gas vehicles (NGV) pumps at petrol stations besides building new stations fully equipped with NGV pumps, especially in high demand areas in the Klang Valley and major towns.

    This would encourage more long-haul transport vehicles to use natural gas, he added.

    Mustapa said the Government had provided several incentives to promote the use of NGV. They include among others:

    ·SETTING the price of NGV at half the price of petrol;

    ·GIVING a 50% road tax reduction for mono gas vehicles and 25% reduction for duel-fuel vehicles; and

    ·GIVING a 5% exemption on import duty and 10% on road tax on NGV conversion kits for vehicles.

    To mitigate the negative impact of the oil price increase, Mustapa said the Government had formed a Cabinet committee to study its impact while another committee was set up to address issues relating to diesel price and supply.

    He said the impact of an oil price increase was felt immediately due to globalisation and technology advancement but the extent of its negative impact would depend on the economy’s performance prior to the oil increase.
    Source: TheSun
    Think the ministry should seriously consider putting the national wealth back into the economy to improve the infrastructure of the country to spur further development, doing away with the tolls that presently flood the Klang Valley.
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  2. #2
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    Quote Originally Posted by ivanhow
    Another petrol price hike in the cards? Even the strengthening of the ringgit may not be sufficient to keep the petrol price under cover...

    Think the ministry should seriously consider putting the national wealth back into the economy to improve the infrastructure of the country to spur further development, doing away with the tolls that presently flood the Klang Valley.
    Well... Maybe one day, the Govt might do away with the tolls... BUT not by this Govt or not in our natural life time....

    BTW. they will always use fuel prices from our neighbors (countries) to shut us up....
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    Quote Originally Posted by ivanhow
    Mustapa said one of the ways to reduce the dependence on subsidy would be to change one’s mentality, as “we need to accept the fact that natural resources such as oil will run out in 18 years.”[/B]
    This is probably the closest thing to an admittance of Peak Oil that the Government will ever do. Problem is, natural gas itself is a fossil fuel...

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    Err...read somewhere recently...that malaysians would loose all its natural Crude Petroleum Oil resource...by 2009...or something like that...!!!???

    Ahem...from then onwards...we would have to TOTALLY be dependent on FOREIGN imports for our nation's requirement of the freaking fossil fuels...???

    Err...Saudara IsaRahim...Salammu'alaikum...could you be kind to clarify on this...???...what then would the negative impacts be...???....TQ

    yand amat bingung Orchi....

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    Anyone who want cheap oil can go Brunei Darussalam.

  6. #6
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    Quote Originally Posted by orchipalar
    Ahem...from then onwards...we would have to TOTALLY be dependent on FOREIGN imports for our nation's requirement of the freaking fossil fuels...???
    We won't be TOTALLY dependent on foreign oil, just that we'll start depending more and more oil imports to "top up" our own decline in oil production. Same thing happened to the US. Back in the 60's/70's, the US was one of the top producers of oil in the world, on par with Saudi Arabia if not above it. Now it accounts for 5% of the world's oil production, and needs 25% of that for itself.

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