Focus View
Rising oil price a double-edged sword
FocusM team | 10 Nov 2017 00:30
The government’s Budget 2018 and Economic Report 2017/2018 projections are based on the premise that the world crude oil price will average US$52 per barrel in 2018. 

The good news is, the oil price is currently hovering around US$63 per barrel. That could mean an extra revenue of RM10 bil going into the government’s coffers. 

Hopefully, extra revenue will benefit the man-in-the-street and not be spent on some non-essential mega projects. The authorities should continue to spend taxpayers’ money judiciously and not see the extra revenue as some honey pot for everyone to put their hands into. 
 
The rising oil price is a double-edged sword. While it earns higher revenue for the country, it also raises the price of fuel at the pump and thus the inflation rate. On Nov 9, the price of RON95 rose by seven sen to RM2.31 per litre, one of the highest levels in recent months. In early July, it was just RM1.89 per litre. 

Recently, Finance Ministry secretary-general Tan Sri Mohd Irwan Serigar Abdullah sprang a surprise when he revealed the government still subsidises fuel prices by a few hundred million ringgit a month. It also raised questions as to what the actual price of petrol should be at our pumps.
 
So with this latest seven sen per litre increase for RON95, is the government still subsidising fuel? The absence of a clear explanation only leads to speculation and confusion.  

The authorities should just make public the details of the fuel Automatic Pricing Mechanism (APM). Taxpayers have every right to know how much of their money is being spent on fuel subsidies. 
 
There are fears that the world price of oil may soon climb to US$70 per barrel, given the political developments in the world’s largest oil producer, Saudi Arabia. If the pump price increases further, inflation might spike to above 5% in November. It was 4.3% in September due mainly to higher transportation costs.

A rising inflation rate will be untenable on the Malaysian economy. It will raise interest rates and erode savings. Already the weak ringgit is causing hardship to the people in the form of higher prices of essential goods such as imported milk powder.  

The authorities may not be able to control world oil prices but they can certainly control inflation through strict enforcement. In the light of the latest petrol price increase, that must be the priority.