An email from Joe Public

This morning, I received an email from Joe Public on the petrol price increment and his comment on the scheduled 2pm protest in front of KLCC.

From: "Joe"
To: mack@brandmalaysia.com, "Jeff Ooi" <jeffooi.screenshots@gmail.com>, SK <skthew@gmail.com>
Date: Fri, 3 Mar 2006 09:36:19 +0800
Subject: the irony of it

Fellers,

There are places in this world where petrol at grade RON-95 is sold at US$ 0.05, give or take a cent or two. In such parts of the world, the price is fixed by the government and hardly ever changes. How do they do it?

Typically there is only one retailer of fuel in countries like the ones I’m talking about. The said retailer tends to be a state-owned enterprise, and although the state-owned retailer may have sub-retailer arrangements with sole proprietors and small business owners, there is no competition and no fuel retail industry per se. The fuel that is sold is refined from that country’s own crude oil production, hence there is no import cost, only an opportunity cost to the crude oil that is not exported. Furthermore, since the retailer is typically a state-owned enterprise, there is no requirement to make a profit, and economic viability is framed in terms of how much cheaper fuel can be sold.

Compare that situation to Malaysia.You have your Shell, Mobil, Caltex and Petronas retailing fuel to consumers.

Some will argue that Petronas should just give away petrol and diesel to Malaysians (and they could probably do it, provided earnings from sales of crude oil worldwide are sufficient to cover the cost of this "national service"), but what of the other retailers? Isn’t it unfair on other retailers, who have revenue and profitability KPIs to meet, if Petronas were to simply give away petrol and diesel? We could just tell Shell, Mobil and Caltex to close shop, or even nationalise their retailing assets, but what would the moralistas and foreign investors say?

The compromise is for the government to implement a fuel subsidy, for the benefit of Malaysian consumers, to ensure that price of fuel can be regulated to a certain extent. However, welfare economics theory dictates that at certain price levels of inputs, the price of outputs and / or level of subsidy has to be adjusted in order for the welfare mechanism to be economically sustainable.

The irony of it is that Malaysian consumers want to have a choice as to which retailer they get their fuel from. Some even consciously avoid going to Petronas stations for reasons of their own. This desire for "freedom of choice" comes at a cost, and I reckon Malaysians should be thankful that the fuel subsidy has not been completely removed.

Having said that, since the typical Malaysian is a kiam sap bastard, of course there will be complaints about the price increase. Some idiots are even calling for revolution lah, protest lah and whatever shit. I’d like to see how many people actually show up at KLCC park this afternoon – will there be 5,000 or 5? Will the revolutionaries show up if it rains? Will bloggers actually show up to lend support, or will they choose the comfort of their air-cond rooms instead? Typical, typical Malaysians.

Cheers,
Joe

If possible, this blogger is going to ask any tourist three questions:

1) What do they think about the price hike of fuel in malaysia?
2) What do they think about these people protesting?
3) How do they feel as third party observers?

Watch this space.

Related posts:

1. Petrol price hike, again?
2. Petrol price: Down 15 sen to RM2.30
3. Major overhaul in public transportation: Anotber blank promise?
4. PM: A small sacrifice by the rakyat for a better facility
5. Najib on petrol price: Don’t misunderstood, it’s only a review …