Which is which?

If you stand up holding an egg in your hand and then release it, it will certainly drop down to the floor and crack. Now what causes the egg to drop?

A group blames the earth’s gravity for it will not drop if there is no gravity while another says it will never drop if you just don’t release the egg whether gravity or not.

What has this to do with our recent historic fuel price hike?

Like the first group, from my personal observation our government and the policy makers (many themselves probably are not crystal clear about the surrounding factors themselves) quickly joined in to blame the soaring world prices alone and thus justifying the inevitable price increase.

Another group blames the way the government spend its money and wastage of public funds that had led the government into a state of very low and critical financial position therefore, is scrambling for immediate injection of cash flows.

I belong to the 3rd group. I believe in the balancing of both. Simply put. Malaysia being an oil producing and exporting nation, the world price increase is a very favorable and wonderful plus indeed.

We are blessed and have every joy to be in this oil business without which our economies would have collapsed ages ago from the way money are spent or wasted. We ride the prosperous oil-wave and happily reaping such “win-falls’ as they come. Meaning, business is extremely good.

But sadly, little or nothing is ever mentioned about such national win-falls. In accounting question, can’t this win-fall absorb, contra or offset the present petrol subsidy? Isn’t this a ‘left and right pocket’ situation?

Personally, this ‘fuel subsidy’ thingy is actually more like card shuffling. For the majority lay people it appears like the government is paying Petronas heavily for the differences on behalf of the rakyat in tandem with the latest world market prices. Otherwise, we are depriving Petronas from maximizing their profits under the current up-trend.

Simple example.
Petronas retail price = 3.00
Rakyat pays at pump = 2.70
Government subsidizing Rakyat by paying 0.30 to Petronas

Right? No! wrong. Because the government does not and will never pay Petronas in such manner. Period. In fact, it is the other way round. Petronas helps to collect that 0.30 from the Rakyat on behalf of the government as taxes and pays the government in (fastest way possible) daily, weekly, monthly or as directed. Why? because the government needs the 0.30 badly and quickly.

What the government means by subsidizing is that, under normal commercial practice, the government should tax that 0.30 or more from the Rakyat.

But by not taxing, it suffers a tax deficit or some call it lost of income opportunity on the petrol sales to the rakyat. In simple term, this is called “Subsidy”.

On the other hand, does it mean Petronas is taking this opportunity by raising its retail prices in tandem with the lucrative world current prices to reap our domestic consumers too? Perhaps or not we do not really know and unless one gets the privilege to sit in its executive board.

I strongly believe that the real reason for the price hike is mainly and purely because the government needs cash injections badly and quickly harping lamely on ‘world price increase’ factor alone.

As if that is not enough, we get salt rubbed into our wounds when it cunningly includes a build-in pre-charged mechanism (charging us more) with a promise of certain rebates some time in the future. Why make us pay-forward with a consolation of a rebate?

From my view point the price increase factor is over played and focused only to hoodwink us from the real unpopular facts.

I cannot deny the fact that every government needs endless source of funds to run a country. To short a long story, when a government is having severe cash flow problems (for whatever reason) it will require quickest injection of cash.

Just waiting for commercial trade-tax and income tax would be time consuming and not fast enough under the prevailing situation. Petrol is always a favorite pick. It is quick solid daily cash.

Immediately 4 questions pop in my mind.

1. What happened to our National Petroleum Company Petronas’ win-falls’ all this while?
No one seems to come out to shed clearly on this.
2. Do you mean that Petronas is not satisfied over the ‘win-falls’ and is after us for more winfalls?
3. Don’t you think that the government is actually enjoying a “double dip”? One from Petronas win-fall profits and the other from the domestic price increase? Bear in mind, either way, they all go back to the government.
4. Why the government portrays as if our import of oil is more than our exports and having the lousy habit of comparing prices with countries ‘that produces not a single drop’ and whose per capita income is way above ours?
6. What if the government is cash rich? Will there be a need to impose a price increase?

Where is the logic? It is obvious that no government would declare that they are having severe cash flow problems due to extreme over spending. We need to read carefully in between the lines to know deeper.

So sit down and think very hard over these pointers. Is this really all about adjusting to ‘world oil price increase? Or is it all about a government in a dire need for extra cash flow injection and citing the ‘world price’ as a good excuse to remove the so-called subsidy.

Forthebetter

CAN THE OWNER OF THIS BLOG OR THE ADMINISTRATOR KINDLY DARKEN THE BACKGROUND COLOR? TOO BRIGHT LAH!!