Petrol hike imminent

All Malaysians wait with baited for the the increase, it is not an if anymore, if you look at the removal of fuel subsidies to rapidKL and the sale ban to foreign cars at our borders.

The question Batu 9 wants to examine is whether a price hike is good or not, but on what will happen next with the increase. The effects we are likely to see.

Firstly politically it is going to increase the ante on whether Anwar can bring petrol prices down or not. If there is growing sentiment he will be able to and sustain it, then the pressure on MPs already on the verge of leaving the BN will increase exponentially. Plus some of these MPs have made their minds up and are looking for a convenient excuse to leave honourably, just like Ezam using the alleged extended powers to the Anti-Corruption Agency as a basis to rejoin Umno.

It is almost like the global oil price hikes are coming at an impossible time for Badawi. The culture of giving goodies for loyalty might be drawing to an end.

Second, the prices of other goods will increase and hoarding will be prevalent to encourage more price increases. This is a phenomenon which is expected, however businesses in Malaysia are known to take advantage of the situation and a more exaggerated inflation is likely. And government policies are always directed to price control as a means of price stabilisation.

I’d would like to see if the federal government can come up with policies of persuasion, engaging key players and getting them to moderate price increases. Your local mamak restaurant owner will claim that he has to pay more for flour, sugar & etcetera, however when that additional cost is divided to to what it adds to the price of a single roti canai, then the affect may not be demonstrably high. The question is whether the restaurant owner is willing to live with a slightly lower margin for his roti canais?

Persuasion policies have to be simple and direct, and federal government officers must themselves understand basic economics and then share the basic ideas to the everyday restaurant owner for example.

Public confidence and then business confidence has to be managed. I fear this might not happen.

LIfestyles are likely to change. Already there are indications people are starting to dine less outside, the second follow-up would be them reverting to public transportation. If your fuel expenses goes up by 20% then public transportation has just become 20% more attractive in the mind of the layman. Factor that with the increase of groceries and meals, public transportation might be the biggest victor in this situation.

If public transportation providers are able to provide the goods and show an ability to integrate seamlessly their services. The lack of a fuel subsidy might be a chance for rapidKL to relook at how they do business and deliver better value to their customers, perhaps some blue ocean ideas.

Finally, domestic flying except for Peninsula-Borneo might dip substantially. Despite Air Asia’s better supply chain management the cost of higher fuel is starting to affect them and the prices will rise.

The funny thing about fuel is that it has a direct, indirect and symbolic relationship with the everyday activities of people. And the culture of fear and subservience indoctrinated into the Malaysian mindset might make Malaysians over-react to substantial price increases and worsen the situation more than expected.

Time will tell.

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