Friday, August 1, 2008

A So-so Approach to Fuel Price Reduction

Coming September 1, the oil prices in Malaysia would be adjusted according to the current world oil prices - more precisely, the price of gasoline, not on crude oil prices. However, the diesel price will remain the same. For instance, if the price in September remains at $129 per barrel, the cost per liter in Malaysia would be at $2.64 per liter, meaning, saving roughly $2-5 each time you pour petrol.

1. But however, this strategy is to say okay but not effectively enough. The more proper approach is to review prices on diesel first because part of the food costs derives from transportation unless you are staying in Cameron Highlands - then you can get vegetables there at a very low cost. Hence more priority should be taken to look at diesel first before petrol.

2. Letting the oil price float according to the world price is a IMF prescription as mentioned by Anwar. Tun Mahathir would definitely will not let the ringgit weaken further if we simply let the market forces decide. It will happen badly in the next two months or so. Take Indonesia for example, the country's economy turned from bad to worse after taking the IMF package. Malaysia should start implementing a exchange rate tool to control inflation like Singapore does right now. That is why, Singapore is able to cushion much in preparation of the coming economic tsunami later on.

3. If the Permatang Pauh by-election is decided to be held after September 1st, there could be a risk where postal votes would come in to make sure Anwar doesn't win the election. That is because those who ferry in postal votes are likely to be happy to do so since the transportation cost would be reduced, depending on how much it would be reduced at the end of August.

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