Thursday, June 5, 2008

Petrol 41%

DJ Malaysians Brace For Era Of Expensive Fuel After 40% Hike (2008/06/05 13:44PM)

KUALA LUMPUR (AP)--Malaysians entered an era of expensive fuel Thursday after the government raised gasoline prices by a whopping 41% in a politically risky decision that could undermine its already-shaky position.
Long lines of vehicles formed at gasoline stations overnight to fill up before midnight when the new pricing came into effect, and brawls broke out as some motorists tried to jump the queue.
On Thursday, gas stations were mostly deserted. Small groups of opposition workers staged protests in downtown Kuala Lumpur and in northern Ipoh town.
But generally the public mood was one of resignation. Most accepted that, with global crude oil prices soaring, they could no longer enjoy the hefty subsidies that had kept fuel prices here among the lowest in Southeast Asia.
"If we don''t increase the fuel price now, the economy will go down," said Chong Wai Ket, a 29-year-old shopkeeper in Kuala Lumpur.
Truck and bus operators complained that they can''t absorb the drastic price hike, which may force many of them to shut down.
The pump price of gasoline went up to MYR2.70 (US$0.87) a liter, or MYR10.23 (US$3.30) a gallon, from MYR1.92 (US$0.61) a liter. Diesel prices rose even higher by 67% to MYR2.58 (US$0.80) per liter.
Like other Asian countries, Malaysia, a net oil exporter, is facing a spiraling fuel subsidy bill that could have been more than MYR56 billion (US$17 billion) due to rising world oil prices.
"We cannot naturally keep subsidizing at the current rate," Prime Minister Abdullah Ahmad Badawi told reporters after announcing the new price structure Wednesday.
Despite the hike, gasoline prices remain lower than other Asian nations such as Singapore, Thailand and India.

In addition, Malaysia also increased electricity tariffs from July by as much as 26% for some consumers. The government also imposed windfall taxes on independent power producers and plantation companies.
Opposition parties slammed the hikes as excessive and a burden for the poor. The Democratic Action Party, or DAP, said it would hold more protests to demand the government back down from the plan.
"There is a sense of public outrage...both on the increase and the manner in which it was done," said DAP chief Lim Kit Siang.
Former deputy premier Anwar Ibrahim, who now leads the opposition People''s Alliance coalition that includes the DAP, criticized the government for cutting fuel subsidies when national oil firm Petronas is making profits.
"This is what we call weak and irresponsible economic management," he said.
The energy price hike - the first one in two years - is expected to push inflation to a 10-year high of around 5%, up from 3% now, slow consumer spending and hurt economic growth.
The concerns led to a drop in Malaysia''s stocks, bonds and currency on Thursday.
The move carries great political risk for Abdullah, who is fighting for his political survival after his ruling coalition''s shock election losses in March.
Ibrahim Suffian, director of independent think-tank Merdeka Center of Opinion Research, said Abdullah''s popularity will plummet as the price hike will hit his main supporters - low-income rural ethnic Malays - hardest.
"It''s going to be hard for people to accept. There will be an immediate adverse effect on his popularity. It will mean a massive drop in his last bastion" of support, he warned.
Abdullah has appealed to people to remain calm and not take to the streets.
He said the revised energy prices would save the government MYR13.7 billion (US$4.4 billion), which would go to improving food security including subsidizing imported rice, flour, bread and cooking oil.

The government also scrapped a short-lived ban on sale of gasoline to foreign-registered cars near its borders with Thailand.
(END) Dow Jones Newswires
June 05, 2008 01:44 ET (05:44 GMT)
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