Filling up, a painful
experience
Are we to believe all those hardball politics ? Many don't and it makes life difficult for Prime Minister Abdullah Ahmad Badawi.
People like Anwar Ibrahim, estranged former Prime Minister Mahathir Mohammad and Pakatan Rakyat have vested interests to demonise Prime Minister Abdullah Ahmad Badawi.They should not be looked upon as guardian angels.They are the demolition squads.
Anwar wanted Pakatan Rakyat to take over the government and he takes the post of prime minister.Mahathir has an axe to grind with Abdullah for the shelving of his vision of grandeur.Mukhriz Mahathir has lost his sense of balance and had become a chip of the old bloke.
Put any of them to run the government under the present situation you would see the same scenario.Their incessant barkings are now becoming a source of annoyance and an insult to the intelligentsia.
It is amusing to note that an article on comments made by Mahathir in his blog on the recent price hike of petrol and diesel appeared in Malaysiakini penned by one Syed Jaymal Zahiid. Malaysiakini appended a table on the price of petrol in other oil producing countries without doing an analysis and rendering of the different economic and social structures of those countries in comparison with Malaysia. The table from the said article is reproduced below:
Looking at the prices in the table any laymen would
immediately conclude that the Malaysiangovernment was wrong and could well afford to
give the people cheaper price for petrol and diesel because we are oil producing nation.The purpose of the table is to mislead those who has no grasp of economics.
The writer and Malaysiakini should have shown some semblance of responsibility to explain the purpose of the table.
Malaysia is not in the same league as those OPEC countries mentioned in the table. Crude oil is not the staple food(product) of Malaysia. Our domestic consumption of oil is almost 78% of our production capacity.We are a minuscule net exporter of crude oil.
Let's take Venezuela, which has the same population as Malaysia.It produces 2.8 million barrels per day and exports 2.2 million bbl per day and consumes only 599,000, bbl per day. Its economy depended solely on export of crude oil.Almost 90% of its export earnings came from export of crude. It has the lowest price for fuel oil among OPEC members, an unimaginable amount of RM0.16 per litre.
President Hugo Chavez is doing what Mahathir has been doing for the 22 years he was in power.Instead of making strong effort to raise to optimum level the income and living standards of the people, he pampered them with all kind of subsidies just to keep himself in power. The Malaysians' mindsets are now finely-tuned to the subsidy mentality.
Let us now take the other end of the spectrum, UAE (United Arab Emirates) with a small population of 4.6 millions.It produces 2.54 bbl/day and exports almost all of its premium crude.It imports around 137,000 bbl/day for part of its domestic consumptions. Although it could offer its people the cheapest price for petrol or even give it away free, it didn't.Its domestic price for petrol is MR1.19 per litre which is about the same price during Mahathir's time.
UAE is a forward looking nation and has diversified its economy to be not solely dependent on its crude oil export.Unlike Chavez of Venezuela, the rulers of UAE are fully secured in their seats and have successfully modernised and elevated the income level and living standards of the people.
Prime Minister wannabe Anwar Ibrahim said the price hike “wanton in size and callous in effect” and described the steepness in the price increase as unconscionable.
Anwar together with his former boss played equally damaging role to propagate a carrot and stick administration during his time in UMNO.He did nothing to stop the abuses when he was in the comfort zone.If you opposed the government you are seen as a security threat and are likely to be charged under the ISA. If you are a strong party supporter or a clever sycophant you would be rewarded with lucrative government contracts or given well-established public listed company on the platter that can make you an instant millionaire.
More shameful is Mahathir veiled attempt to mislead the people by saying that the government has the money to keep the fuel subsidy. He is either bad in mathematics or intentionally misrepresented Petronas profits.
For an ex prime minister who had 22 years experience in running the nation he should know the nitty-gritty of economics and interpretation of financial statements.As an adviser to Petronas such blatant disregard for facts and figures is inexcusable.
Writing in his blog he said“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 RM27 billion.
“But Petronas made a profit of well over RM70 billion, all of which belong to the government. I feel sure that maintaining the subsidy and gradually decreasing it would not hurt government finances,”
"Three years ago the selling price of crude was about USD30 per barrel. Today it is USD130 – an increase of USD100. There is hardly any increase in the production cost so that the extra USD100 can be considered as pure profit.
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"
Mahathir's above calculation is grossly misleading and most unexpected coming from someone like him, who is adviser to Petronas and one who knew the inner workings of government.The RM27 billion he calculated is gross sale not profit.
Below are details of the world prices of crude and the spot price of Malaysian Tapis for the period shown there in.Prices are not average but year end price.The annual average price would be much lower.
Year World Price US$ Malaysian Tapis US$ (in red)
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Dec 2003 28.13 32.03
Dec 2004 33.05 38.41
Dec 2005 51.73 61.97
Dec 2006 55.95 65.57
Dec 2007 89.76 98.44
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Jan 2008 85.53 93.69
Feb 2008 95.15 104.21
Mar 2008 99.32 107.88
Apr 2008 111.03 120.88
May 2008 126.06 138.43
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The price reached US130. bbl only in May 2008.
Assuming we take the year end price between 2003 and 2007, the price for the period would be an untrue average of US$59.28 per barrel for Malaysian Tapis Spot.Let us assume the true average was US$50.00.
Assuming Petronas produced a daily average production of 600,000 bbl/day for the period, the annual gross sale of crude would be US$50 x 365 x 600,000. = US$10.5 billion before deducting operational costs, royalty to states and taxes.
Let us work out how much Petronas make between the period Mahathir left office and Abdullah took over the helm to the end of 2007.
Annual sale of crude US$10.5
Less:5% royalty to states .525
-----------
9.975
Assuming all other costs were
50% of net sales 4.987
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Net Profit to Petronas 4.987 x 3.20 = RM15.96
Petronas annual profit attributed to export of crude oil between 2003 to 2007 was only RM15.96 billion not RM27 billion as made out by Mahathir.Petronas also generates profits from it other operations especially its LNG and refined petroleum operations.Its other profit centres are from its overseas operations in other countries. In 2005 its revenue was US$44.3 billions and made a net profit of US$11.6 billions.
Petronas current crude production is in the region of 700,000 to 730,000 barrels per day.With the current high price of crude it probably can make RM60-70 billions from all its operations.
Malaysia's domestic consumption is in the region of 550,000 barrels a day and about 300,000 barrels of crude are imported to supplement the domestic needs .It is obvious from the amount of domestic consumption which is almost 78 % of the total crude production it would be unwise to fleece Petronas to continue with the subsidy. It would be likened to " kill the goose that lays the golden egg" if the government were irresponsible and continue the subsidy just to be popular with the people.
During Mahathir's time when the price of crude was much cheaper, averaging less than US$20. per barrel , Petronas profits had been even smaller. He kept Petronas accounts a closely guarded secret.
Why did Mahathir keeps the accounts of Petronas a secret? It is obvious he didn't want Malaysians to know how the money was spent and what are the reserves left after the many bail outs of failed projects and insolvent financial institutions and financing of his grandiose projects. Petronas is also wasting money on prestigious and non-revenue generating projects such as the Petronas Philharmonic Orchestra and bankrolling the F1 races. Now he claims the government is flushed with money.
The price of crude reached its peak at the end of May but have eased slightly since then.Will the price breached the US$200 mark this year?
21 comments:
Dear HantuLaut,
Nice article and I must admit I'm not that good in economics except the simple maths I used when buying fish at at the market.
Your article does presents a true and clearer picture and though a bitter pill, had to be swallowed anyway.
Have a nice day.
Dear Hantulaut,
I concur with your assessment about UAE, Malaysia should be more like UAE than Venezuela. However, U forgot to mention that despite UAE being a forward thinking nation and highly developed, you failed to mention that it did not practice democracy. That is why the people are thought to be 'happy'. As they are no oppositions in the UA government.
One thing that you are wrong is that TDM did raise the income per capita of the nation tremendously since he took power in 1981. The GDP per capita of Malaysia rose 8 folds since he took over. As compare to Venezuela since since 1981, their income per capita only rose about 70%. SO i think you were wrong in your assessment. Therefore, I conclude, reading between the lines in your article, you agree with UAE's style of govt which practices strong, nearly dictatorial style of govt. I conclude that is it much like how TDM managed the country over the years. I think democracy stifles too much of the nation's progress (which you champion). China (communism) had great grwoth in their economy all these years. You must be really proud of them. Singapore (they think it's democracy but actually it's a monarchy run by the Lee family) also had good run in it's economical growth. Too bad in the pursuit of the enigmatic democracy, we forgot that democracy is just a means to an end. It is the 'end' which is more important - prosperous nation, not the means itself. We now have a more democratic Malaysia. But are we more prosperous than before (pre 2003)? No. Why?
Jebat
Agreed with pok kam, long article but helpless. Think Tun explaination so called opinion by some still the best so far. easy, simple, plaint and the msg is evry clear, PERIOD. Tun is the BEST PM Malaysia ever had, what ever people opinion will remain as opinion as this guys proof he self likewise others.
Interesting analysis... no question about the "reality" of high crude oil prices nowadays, though I'm sure you'd agree that a lot of it has to do with speculations rather than fundamental supply & demand. The question that many raised is about the "suddeness & quantum" of the increase by AAB, SIL&Co. Yes, there would and should be an increase in the pump prices of oil, but is it wise to have it at such a quantum & in one go? The inflationary impact is going to be across the board and instantaneous and will have a dire impact on the "typical man in the street", if there is such a term nowadays? Its a question of the govt. "absorbing" the impact and "releasing" it gradually, vs a "cold water shock therapy" that AAB, SIL&Co. decided to adopt, which is very short-termism in nature (which reminded me of IMF style economics prescription). I suppose, as with and on many occassions of his tenure (including the dates for the GE, etc.) AAB, SIL&Co. "suddenly" got the "ilham" overnight and decided to raise the oil price likewise... what can I/we all say? nasib lah...
Dear Hantulaut,
Please quote accurate figures when you want to make statistical comparisons; Or else, you will be of no difference to those in the current government.
How I wish the inflation figures will be only 5 %, I'd probably LOL in my dreams. Our Government likes to provide statistical masturbation to soothes the naive !
If I am not mistaken, since the financial crisis in 1997-1998, The country petroleum production has been averaging 700,000 barrels perday
summerhawk
One thing we are sure is neither one opinion is absolutely right or absolutely wrong. That is why we need expert managers to manage our country. We all subscribed to doctrine of democracy (again depends on the extent of definition one wants to meant- another argument). Basically as long as majority are happy we settled with it. That would be the accepted norm. So we see here making people happy isn’t just about displaying statistics.
Hantulaut may be an economist others perhaps engineers or medical doctors, so divergence of know how, in real life there is no single profession monopolizes politics. Politics I would say very much of an art. Thus the job of the managers of our country is by making thing possible. I think this is exactly what Abdullah Badawi is doing. If it is possible, that majority of the people will accept the petrol hike without creating havoc? If havoc happens, government can’t stop it, and if majority of Malaysian want to go for demonstration on the street, by this time I can say Abdullah Badawi is wrong. Politician has to fix it.
I for one would like to see our political system changed. Say a bi party system or called it two blocks. It isn’t just because I want to follow USA or UK system, but that the nearest system we could have and the only available system that many other countries in the world are envious to have. If one thinks about duplicating a kind of system of government from Middle East, I think many of our young would reject it when no country is seen credible to set as an example, perhaps there would be bigger havoc in the future.
What I am trying say here is, our leaders are lack of skill against the background of the world today. We want our young leaders to be prepared and understand that we no longer live as 50 years ago where our parents or may be many of us subservient to leaders from UMNO or BN. BN is basically UMNO I reject most of its leaders especially the old ones now. I don’t believe they will change their attitudes if they continue running the country.
As for the price hike, politicians should be sensitive and tolerable to the rakyat. I expect politicians to know the art of politicking not to the extent of creating misery to the majority of rakyat.
Amde Sidik
pok kom,
There is no doubt at all the hefty increase would hurt those in the middle and low income brackets than those in the upper middle class and the wealthy.
Abdullah's government is taking a big risk that can hang his position and his government in the balance under the already tense situation he is in.
At the moment Malaysia has a healthy foreign exchange reserves and fairly small external debt. Inflation are on the rise due to both internal and external factors.The government inflation figure is understated, the actual figure is higher.
The bitter pill that we have to swallow is that the price of crude has increased sixfold from the time of Mahathir.
No point living in past glory, yesterday and today are not the same.
HL,
Good article. Yes, TDM & DSAI have vested interests by "attacking" Pak Lah on the recent price hike. However, let's get some other things straight also.
Inflation is said to be at 5%? Come on, the Government still expectsus to believe that crap? I don't think I have to elaborate. Everyone knows what lies the BN Govt. spews.
Yes, we are not in the same league as some of the other Oil Producing Countries & yes, let's pay Market prices for our Petrol. BUT, let's also start paying Market Prices for our Cars! ooopssss! Cannot lah...must protect Proton muh!
Yes, let's tighten our belts & let's change our life styles. BUT, let's start with those who have asked us to do that first. Pak Lah, get the BN to STOP bring corrupt. Stop wasting our hard earned Tax money on wasteful projects & filling your coffers!
Once we see that Pak Lah & the BN is changing (so far all talk to nothing done yet) then we will be glad to follow suit!
HL,
Ny the way, Pak Lah needs to show us where Patronas' profits have gone. Ooops...cannot lah...OSA...country may be in danger if the Rakyat knows how many Millions (by now probably Billions) is being spent on the Petronas Orchastera & how many Billions have been spent on bailing out the Govt-linked Companies & God only knows what else!
If Pak Lah hands a "bankrupt" Govt over to his successor (oh God don't get me started on his next in line!), it's not the Rakyat's fault...it the BN's fault. Ooopsss...wait a minute,it is the Rakyat's fault! We have kept them in power for 50 years haven't we?!
Madir is too old to count.
His cals must be wront!
anonymous,
You are wrong,I didn't use UAE as a yardstick.Nowhere in my article did I mention about system of government.I use it to compare economic policy,oil production and price of petrol.
Among all the prime ministers, Mahathir had the best chance to bring the country to greater height.He inherited a good system of governance and had 22 years of autocratic rule.
Yes he did improve the income level of the people slightly.If you think that is great work take a look at our neighbour down south,without any natural resources,a tiny island state with less than 5 million people,ejected out of Malaysia in 1965 now has per capita income of US$48,900 against Malaysia per capita of US$14,400.
South Korea, ravaged the Korean War( 1950-1953), also a country without much natural resources, has brought the income level to U$24,900.
Taiwan, a country that also rises from the ashes is another example of natural resources poor country that has achieved economic success and improved the income level of its people to US$29,800.It also has one of the largest foreign reserve in the world.
It's no skin off my nose if you think Mahathir has done a great job for this country.
Sorry, para 4 should read ....South Korea ravaged by the Korean War...
dhahran sea,
Yes I agree the increase should have been released by instalments to lessen the impact.
On the other hand price of crude has risen so fast over the past twelve months it's probably caught the government off-guard.
The price in May 2007 was about US$67 and today it is almost US$140. per barrel.
anonymous,
Secondly, I stand by what I wrote.If you have paid close attention to what your are reading, you wouldn't have come to that conclusion.
I am talking about Petronas production for export, not total production per se.
kadayanjournal,
A two-party system would be ideal if both parties are equally acceptable to the people for them to switch over if they are not happy with the other policies.
In Malaysia communalism and race-based political party is still the order of the day.As long as this exists the two party system will remain a pipe dream.
I expect the Malays will close rank and return to UMNO in the next General Elections.The scenario in Sabah and Sarawak would be slightly different from that of the Peninsula.
On the subject of the recent price hike on petrol and diesel, making the rakyat happy is the job of every government but making the rakyat happy just to stay in power at the expense of economic fallout that can ruin the nation is reckless and irresponsible attitude of any government.
Zimbabwe is a case in point.
Mugabe,under the pretext of making his people happy took back farmland from white settlers and distributed it to his people and cronies, who have never farmed an inch of land in their life.The country once known as the bread basket of southern Africa is now bankrupt and completely broken because of one selfish and corrupt leader wanting to hang on to power.
I will not allow myself to fall victim to Mahathir's rhetorics.He is an angry man.Angry man don't make sense.He is angry because he felt betrayed by Abdullah's decision to chop his grandiose projects.
I think Malaysians have been pampered for far too long, now is the time to show our true grit.
Dear SM,
As I have said earlier I don't trust our government statistics, the inflation rate was higher than stated and with the recent fuel hike in price, we may see double digit inflation, if the government fiscal policy failed to temper the rising costs of goods and services.
The government should put on hold all projects that bring no direct benefits to the people and work out a formula to compensate those in the middle and lower income bracket.
I am a proponent that all subsidy for petrol and diesel should be removed.The government should only subsidise essential food items and public transportation.Some of the money saved from the subsidy should be ploughed back into improving the public transport system throughout the nation.
Last, Abdullah must set example and go on austerity drive in all branchs of government.
Quote from IHT.com: 'Speaking in London, the OPEC official, Abdullah al-Badri, also called for measures to curb market speculation, Reuters reported. "The situation is unbearable as far as we are concerned," he said. "I want to say, there is no shortage now and in the future."'
...
"Among these are the expectation that prices will fall in the coming year on slowing demand from the West as the economies cool, the effect of the lower subsidies in Asia, which are unlikely to be reversed, and the change in consumer habits as prices stay high."
...
"The market appears to be well supplied with crude oil, he said, citing as an example reports that Iran has been unable to sell some of its heavy crude. He noted that the oil market reacted little to reports Tuesday that Saudi Arabia had increased oil output by 500,000 barrels a day this quarter, 200,000 barrels a day more than previously thought.
The IEA, meanwhile, warned against any fiscal moves by governments that would encourage the use of gas, like cutting taxes."
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Theoretically, cutting fuel subsidy is a right move. But, this country's infrastructure is not yet in an ideal situation for market prices. Furthermore, an administration that treats people like retarded children is simply inviting trouble especially at this tumultuous moment.
Let's see who will collapse first, the angry citizens or the snobbish government.
Perlukan Parti yang memberi sinar Keterbukaan.
Dr. M bukan dalam UMNO jadi Bebas.
Buat sementara waktu mungkin hingga segalanya selesai.
Rombak semula guna TIKET BEBAS, ada persetujuan?
Hantulaut,
U have peformed your duty as crony of Khairy Jamaluddin. Well Done.
"Leaders like him should have the guts and do the honourable thing, ask his MPs to resign and challenge the government to a by-election and prove it that he and his party have the people's support."
I used to think you know a bit of the constitution. I was wrong. You must know that an MP can't resign, then seek re-election in the same seat in the ensuing by-election. So how do you do what you are talking about? Naivety and anger shouldn't make us look stupid.
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