PRIME Minister Datuk Seri Abdullah Ahmad Badawi raised petrol prices by 41 per cent and diesel by 63 per cent overnight, a brave decision that is fraught with risks and unlikely to endear him to the ordinary Malaysian. Despi te the RM652 cash rebate for cars below 2,000cc and RM150 for motorcycles, the steep rise is a heavy burden for the average Malaysian who has grown up on subsidised food, fuel, education and health services, among others.
Worse yet, the increase is just the start and by end August, officials privately say, another increase is inevitable until the pumps sell at prices determined by world demand and supply.
Currently, the worlds price would be about RM4 a litre, so our fuel is still subsidised up to RM1.30 per litre.
"This steep fuel rise is a brave decision but politically unwise. It is going to make him more unpopular," said Ragu Kesavan, the Bar Council's vice-chairman.
It is too steep, it should have been staggered.
"Abdullah has really bitten the bullet. We all know the petrol price is rising worldwide but the sharp increase is unprecedented.
But what would be the political cost?" Like ordinary people, opposition party leaders have been shaken by the fuel price hike but also the impending 18 per cent increase in electricity rates for homes and 26 per cent for businesses from July 1.
"We are shocked... this is unprecedented and unacceptable," said PKR president Datin Seri Wan Azizah Ismail. The ordinary people will suffer much." Opposition leaders are to meet over the weekend to discuss a response and are expected to demand mitigating actions that will help relieve the pain on the most vulnerable, the urban poor.
While most Malaysians were expecting an increase, the 41 per cent hike has them fuming especially when Malaysia is a net exporter of petroleum.
The rise also puts the spotlight on Petronas, the national oil corporation, its income, and how the use of that income is shrouded in mystery.
Our pump price is about the highest among net petroleum exporting countries, critics point out, saying the situation is baffling.
In comparison to our RM2.70 a litre, in Saudi Arabia the price is RM0.38/ litre, Iran RM0.35/litre, Nigeria RM0.32/litre, Turkmenistan RM0.25/litre and Venezuela RM0.16/ litre. Even in Indonesia, where oil production has dropped so low that it wants out of OPEC, the price after last months 30 per cent increase is RM1.86/a litre.
The inevitable question many Malaysians always ask is why we have to pay so much more when we are an exporter of petroleum and Petronas earns huge profits yearly.
"Why cant the profits be channeled back as subsidies to keep prices low for the benefit of the people?" asked Kesavan.
It is a question even Anwar Ibrahim had posed numerous times during the March 8 election campaign.
And why not? It is a question neither Petronas nor the government has answered satisfactorily.
Now that the inevitable has happened, an immediate reaction would be a sharp fall in demand as had happened in Indonesia.Low-income consumers tend to cut back or give up cars and fall back more on public transport no matter how unreliable it is.
Higher income consumers tend to consolidate, giving up one or more of their cars and start car-pooling and implementing other costreduction methods they had talked about but never practiced.
Then again , some Malaysians, put off by the poor public transport system, will keep their cars but cut back on other expenditure to keep the car running even on costlier fuel.
The only hope of cheaper fuel from now on is for world prices to drop.
Ironically, on the day Malaysia raised petrol prices, world oil prices, which had been falling since a high of US$139 (RM451) on May 22, dropped to US$123 (RM399) a barrel.
The reason: investors fear that rising prices will lead to falling demand!
