Fuel Woes
July / August 2008
Malaysians got a shock to the system when the government slashed the fuel subsidy in early June, raising the price of petrol by about 41% from RM1.92 (USD0.59) per litre to RM2.70 (USD0.83) per litre. Despite the price increase, the price of gasoline in Malaysia is still the lowest in the region apart from Brunei.
Without the cut, the fuel subsidy would have ballooned to RM33 billion (USD) from last year's RM8.8 (USD) billion. To cushion the impact of this politically unpopular move and dampen public disquiet over the fuel price hike, the government announced a one-off cash rebate of RM625 (USD192.5) for owners of vehicles with an engine capacity of up to 2000cc and a rebate of RM150 (USD46.2) for owners of motorcycles up to 250cc, among other palliatives.
However, the rebate has been widely criticised since it ignores the financial distress of the rural and urban poor who don't own private transport but need extra cash to pay for food and other basic necessities that have gone up in price.
Although there have been calls to ditch the car and take public transport, the state of Malaysian public transport means that many Malaysians will be sticking to their cars despite the new pressure on their budgets. The public transport network is not well-integrated and buses, subways and trains are known for congestion and lack of reliability. To remedy this, the government has said it will make improving the public transportation system nationwide one of the major focuses in the 2009 Budget in order to persuade more people to use public transport. Currently, about 16-20% of people use public transport in Malaysia compared to between 50-70% in developed countries.
Apart from affecting the overall quality of life, higher fuel prices will be a drag on the economy.
In particular, higher fuel and food prices will reduce disposable income and crimp consumer spending among lower and middle-income groups. Since domestic demand is a key growth driver, economic growth is projected to slow to about 5% for 2008.
Malaysians got a shock to the system when the government slashed the fuel subsidy in early June, raising the price of petrol by about 41% from RM1.92 (USD0.59) per litre to RM2.70 (USD0.83) per litre. Despite the price increase, the price of gasoline in Malaysia is still the lowest in the region apart from Brunei.
Without the cut, the fuel subsidy would have ballooned to RM33 billion (USD) from last year's RM8.8 (USD) billion. To cushion the impact of this politically unpopular move and dampen public disquiet over the fuel price hike, the government announced a one-off cash rebate of RM625 (USD192.5) for owners of vehicles with an engine capacity of up to 2000cc and a rebate of RM150 (USD46.2) for owners of motorcycles up to 250cc, among other palliatives.
However, the rebate has been widely criticised since it ignores the financial distress of the rural and urban poor who don't own private transport but need extra cash to pay for food and other basic necessities that have gone up in price.
Although there have been calls to ditch the car and take public transport, the state of Malaysian public transport means that many Malaysians will be sticking to their cars despite the new pressure on their budgets. The public transport network is not well-integrated and buses, subways and trains are known for congestion and lack of reliability. To remedy this, the government has said it will make improving the public transportation system nationwide one of the major focuses in the 2009 Budget in order to persuade more people to use public transport. Currently, about 16-20% of people use public transport in Malaysia compared to between 50-70% in developed countries.
Apart from affecting the overall quality of life, higher fuel prices will be a drag on the economy.
In particular, higher fuel and food prices will reduce disposable income and crimp consumer spending among lower and middle-income groups. Since domestic demand is a key growth driver, economic growth is projected to slow to about 5% for 2008.
posted by Toyers at
6:27 PM
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