BOOM!! RON95 Cheapest Since 2008 Recession, But Nothing Else’s Cheaper

Thanks to America and Saudi Arabia, Malaysians especially the Chinesehave something to cheer during the coming Chinese New Year festival this month. Effective February 1, prices for fuel have been reduced by 21 sen to RM1.70 a litre (RON 95), 11 sen to RM2.00 a litre (RON 97) and 23 sen to RM1.70 a litre to (diesel). This is the lowest price since RON 95 was introduced to replace RON 92 in September 1, 2009, when it was priced at RM1.80 a litre.

At the present RM2.00 a litre for RON 97, the price is also the lowest since December 16, 2008 when the petrol was retailed at RM1.80 a litre. Of course, if you care to analyse the global crude oil prices, it was trading at US$70 around the time Malaysians enjoyed those good old low gasoline prices. In case you haven’t notice, America was in recession then, primarily due to subprime crisis.

But in 2008 / 2009, Malaysian government was subsidizing fuel prices. There’szero subsidy since December 2014. Today, not only the government doesn’t need to worry about pouring money to artificially lower down the cost of doing business, it actually makes truckloads of money, about RM1 billion in “hidden”fuel taxes since last month. That was according to Pandan MP Rafizi Ramli’s calculation.

And if the government continues to make profits out of you, they would bericher by at least RM7.5 billion every year, based on the average RM402 million they rip off every single month. Again, this is based on MP Rafizi’s calculation in December 2014. What the government did was quite simple but brilliant. They calculate the global crude oil price and simply add another 30 sen for “secret profit” on every single litre and voila, a new price every month.

Many ignorant Malaysians (they always do, ever since the Independence in 1957) actually thought Najib administration has found a magic wand by lowering fuel prices. Amusingly, some actually think they’re blessed to have such a caring government. Just like President Obama, PM Najib Razak has actually done absolutely “nothing” for the present lower gasoline prices.

People still do not realise what is about to hit them this year. The fact that the government refuses to reveal the real mechanism or formula in the so-called managed float system in determining RON 95, RON 97 and diesel prices show how they’re (quietly) laughing all their way to the bank. Najib administration has found a new cashcow. In another two months on April Fool day, the new GST will bring in more truckloads of money to the government.

You see, people still do not understand the basic fundamental – that all the governments “do not” have money. Government collects taxes from the people and businesses, giving an impression that they have money. With various taxes – direct and indirect – government is flushed with billions of dollars to build and maintain infrastructures including roads, streets, bridges, telecommunications, schools, hospitals, electrical grids and whatnot.

Without taxes, governments wouldn’t have a single penny. The presentgovernment is merely a custodian who should transparently uses taxes collected for the benefits of the people. Sadly, neither the federal government (BN) nor the opposition parties (PR) care to provide such governance 101 education to the people. Hence, when a government reduces fuel prices such as now, people think they should be grateful, and that’s amazing.

Despite RON 95 price being slashed by 56 sen since December 2014, from RM2.26 to RM1.70 a litre this month, operators of restaurants and food outlets refuse to drop their prices. They blame suppliers and vendors. But suppliers and vendors also refuse to drop their selling prices. They blame other factors such as currency exchange, cost of raw materials, cost of labour and whatnot.

The whole supply chains can always find some excuses not to drop their prices when fuel price tumbles, and that’s really fascinating. But the same supply chains will always hike their prices whenever there’s a slight increase in fuel prices, and that’s really efficient. And what does the government has to say on this matter? They claim they had engaged with the various stakeholders in the industry, but they could only act as a monitoring body.

Here’s an interesting question. RON 95 is priced at RM1.70 when the crude oil WTI was traded roughly at US$44 a barrel. If the crude oil appreciates by 50% to US$66 a barrel some time this year, will RON 95 also goes up by 50% to RM2.55 a litre? And if Russian Putin goes bonkers and decides to start a war, crude oil could easily doubles to US$88 a barrel. Does that mean fuel pumps will be selling RON 95 at RM3.40 a litre (*grin*)?

Perhaps, giant corporations such as electricity supplier, Tenaga Nasional Berhad (TNB), should take the lead by reducing their rate immediately. Ahh, but the power supplier relies mainly on coal and natural gas so global crude oil prices have no impact on them, says the monopoly TNB. But why the government hiked electricity tariff by 16% in January last year due to the then high international crude oil price?

Okay, let’s assume TNB is really innocent and the reason they raised electricity tariff previously was because Najib administration needed some pocket money so they grilled the citizens’ pocket. But coal prices have been tumbling on China slowdown, so much so that U.S. coal prices have dropped to their lowest level in six years. It was so bad that the U.S. coal production dropped in 2013 to its lowest level since 1993. So what say you, TNB?

-financetwitter