Fuel Price Hike: Is Petronas Guilty?

A few days ago, Malaysia Today posted an article titled "Petronas Could Go Bust By 2018". The article is originally written by Wong Sai Wan of The Star newspaper.

For those of you who don't have the time to read the whole article, it mainly suggested that Petronas will go bust within 10 years if all of its profits are handed to the Government to continue subsidizing fuel. Petronas CEO, Tan Sri Hassan Merican later talked about how production costs have increased in oil exploration and such.

People, of course, are hot happy with these kinds of statements since they seem to justify on the recent fuel subsidy restructuring (read: fuel price hike). But, Petronas will go bust by 2018 ONLY IF ALL of its funds are channeled to the government. So far, the government has NEVER taken ALL of Petronas' profits since 1974, the year Petronas was formed.

However, people got mad because they thought CEO Hassan Merican was making a statement that supported the fuel price hike. And so they wrote nasty comments.

From the comments just below the article, I was just amazed at how ignorant Malaysians truly are. I, too, do not know everything about the oil industry, but when people do not actually understand the situation and at the same time trying to sound smart, they start writing comments that ask people to boycott Petronas and write really stupid questions like "Then why does Petronas spend so much in oversea research for oil resources in corporation with foreign companies?". One fella also questioned "what really Petonas really benifit rakyat???" (See, this fella even had two typos in one sentence) Sheeeesh, I thought I was dreaming when I saw this.

But, you know what, I guess I can't blame people for not knowing how the industry works, but at least I think they should not try to write anything if they don't know facts. Since I am taking Petroleum Engineering as my major and at the same time being a Petronas scholar, I admit such remarks about Petronas only made me feel angry.

Regarding the fuel price hike, people might want to know that Petronas doesn't earn a single cent on the recent subsidy restructuring. In fact, due to the higher prices, local oil sales might even drop and thus reducing Petronas' revenue. So, NO, the price hike has nothing to do with Petronas. In this case, the ONLY party that saves money (RM13.7 billion in total) is our government because now the government no longer has to pay the subsidies to Petronas whenever we go to the gas stations to top off our tanks.

Petronas is just Malaysia's national oil company and it didn't play any role in the fuel price increase, so please stop blaming the company for the current inflation that's storming the country.

Drilling for oil nowadays DO cost much much higher than before (especially offshore) because all the conventional "easy" oils have been discovered and what's left for us to play with is just the small pockets of reservoirs deep deep down below. Bringing the oil to surface is not as simple as "poking" a hole on the ground today and selling the oil the day after that. Some could even take years (I personally believe this is the reason why oil price kept increasing lately due to the time lag the supply needs in adjusting itself to the currently high market demand). Thus, it's clear that whatever Tan Sri Hassan Merican said does hold truth. He at least knew what he's talking about.

So, people, let's not boycott Petronas since that's such a baseless idea it would only bring adverse effects to the country. The one to be blamed is not Petronas but whomsoever that mismanaged the funds channeled by Petronas. You see, when the money is not well managed (due to corruption, etc etc), the country runs out of it and so, now to save more money, the subsidy is being taken away. Well, to know more, do your own research using Google. I prefer not to talk further details about this or I'd just risk my scholarship being taken away or my whole blog being scraped.

Alright. Til my next post, take care, everyone.

I Support Kempen "Mari Ubah Gaya Hidup"

A funny three-month old video now becomes relevant again after the recent fuel price hike. Watch below:

Malaysian Fuel Up 40% Overnight

Although I'm ten thousand miles away from home, I could still hear about what just happened yesterday - a 78 cents per liter fuel price hike - 40% increase from its original price.

Me and my friends talked about this issue, and we had mixed ideas. One of my friends said he just loves the idea of subsidies being scraped away - as in, let's live with the market price and let's stop pampering fellow Malaysians with subsidies. Another agreed on this price hike because he said the government can no longer pay the higher subsidies as oil prices worldwide keep increasing lately. Plus, he said any price increase would definitely start causing people to adapt to a new lifestyle - carpooling, start using public transportation, or even start using old roads instead of highways to keep our expenses low.

My personal opinion? I don't know, but to me, any price increase is not good. It'll take months for me to find any good reason why fuel price increase is favorable. Even Americans are whining now because they're now paying close to $4.00 per gallon (around RM3.25 per liter - some people actually compared this and said "hey, bersyukur la, minyak kat US $3.25 seliter, kat Malaysia baru $2.70 seliter" - URGHH!!!)

At the same time, I'm actually quite confused, as to how the subsidy system really works. There should be a connection between Malaysia being the net exporter, the price of oil increasing and the fact that our government owns Petronas, which is now enjoying higher profits due to the price increase. If Petronas earns more, that means the government now earns more since Petronas is government owned (Plus Petronas pays taxes to the Feds). When the government has more money, doesn't that mean it is now even easier to subsidize gasoline than before - even with worldwide price increase?

I admit I'm not good at how the system really works, but until today nobody from the upper levels had come up with figures to clearly show or explain to us why Malaysian gasoline price should increase by 40% overnight. If increasing world price of oil has really hurt the government's budget due to the subsidies, I'd definitely support any option that'd be best for the situation, but when nobody explains what the hell is really going on at the backstage, how would I know if we Malaysians have been cheated or is this really for the good of the country? If any of you out there actually read this post and knows how the subsidy system really works, please kindly explain it to me on the comment section. I really need to know about it.

You know, it is true, we could all start carpooling now, but reality is - things are always easier said than done. If 50% of our drivers now decide to carpool, I'd award Malaysians as the most adaptable human beings on this planet.

No, it won't be 50%. Even 20% is good enough. Will people start using old curvy roads rather than highways? 20% less traffic on the highways - I'd call that a miracle. And how many people are willing to switch from using their 2.0 liter Honda to a 1.6 liter Waja?

Still talking about adapting? Maybe we need to start including some element of reality in there as well.

Right now, all I know is this - regardless, whether this price hike is the right decision or not, a 40% increase in the price of gasoline at gas stations will absolutely lead to higher inflation. And since most likely Malaysians' earnings won't go up as much as even 20% by next year, I doubt more among us would actually be happy that we're now paying RM2.70 per liter to fuel up our cars. The consequences will be worse.

Wake up, fellow Malaysians. I'm calling all of us find out if taking back the subsidy is really necessary for the betterment of the country. The government now better has some good figures to show us that this decision will benefit our life quality more than the price difference that we now have to pay at gas stations. As one of Malaysian citizens, I demand a thorough explanation on this decision.