Focus View
Make good use of extra oil revenue
FocusM team | 04 May 2018 00:30
The increase in  oil price in recent months has meant Malaysia will receive billions of ringgit in extra revenue this year if the price stays at current levels or rises further. 

And despite the rising oil price in the last seven weeks, the price of fuel at the pump has remained unchanged, much to the relief of motorists.    

The government’s Budget 2018 revenue projections done last October were based on a world oil price of US$52 per barrel. In the first two months of this year, the average price was around US$67 per barrel. By May 2, it had risen to around US$74.

It has been estimated that for every US$1 increase in the world oil price, Malaysia stands to gain RM300 mil per annum. That means that if the oil price remains at current levels, the country stands to gain RM6.6 bil per annum. 

This will be an unexpected windfall for the government. Let’s hope the extra revenue is put to good use and not on subsidising fuel prices. The government earlier this year assured that any additional revenue from higher oil prices would be placed in an account for development purposes. That’s reassuring.  

If we recall, fuel subsidies were gradually removed in recent years as the government felt it was the higher-income group that benefited from subsidies. Their consumption of fuel was higher as they had bigger and more vehicles.

But removing fuel subsidies has its drawback as the higher fuel prices can lead to higher inflation and cost of living. And if enforcement by the relevant authorities is weak, unscrupulous traders would indiscriminately raise the price of their goods and services. This has already been happening. 

No doubt, Malaysians will watch how the world price of oil will impact local fuel prices in the coming weeks. If there are indeed valid reasons to increase the price at the pump, a clear and transparent explanation should be given.
 
The relevant authorities must also explain how movements in fuel prices are calculated. The best way would be to make public  the Automatic Price Mechanism (APM), which is the basis for calculating the fuel price.