Thursday, September 5, 2013

Effects of 20 cents

Twenty SEN is all it takes to cause an uproar in Malaysia or about 9c in Singapore. It's the fuel hike in Malaysia that is going to bring a knock on effect to many Malaysians Nationwide.

Funny part it, at the pumps, the govt placed the NON-SUBSIDIZED RON 95 price to be RM2.79 with duties etc whereas the selling price of RON97 which is NORMAL RETAIL Price is RM2.70 . Is that the Govt saying RON 95 is MORE EXPENSIVE than the better RON97?

Now for the knock on effect.

20sen is about 12% increase on the Petrol Pricing, meaning an average LOW EARNER drawing 3 liters of fuel per day on his motorcycle will see an increase of RM15 per month based on a 25 work day month. To his low wages of RM900, it is about 1.5% increase. However, the huge effect is felt when the cost of transportation is put into play.

Diesel also see a hike of 20 sen which puts at RM2.00 a liter with subsidy. In turn, this will incur approximately more than 30% increase in terms of fuel, oils, maintance et al and that will push prices up further. 

Compare to the neighbours, Brunei charges 53cents (RM1.20) per liter for fuel and that cause the Borneo residents to come over and fill up. Singapore official fuel price is at S$1.18 before discounts at the pump, usually dropping to S$0.81 (RM2.27) per liter at regular petrol stations such as Caltex or Shell inclusive of 7% GST and relevant duties. Black market fuel HSD or even BioDiesel is far cheaper from fleet refuelling points.

So why is Malaysia charging more for fuel when they export them and in the case of diesel, control the usage and implement rationing via the distribution points?

Mainly, the Ringgit is dropping against the USD or SGD. In SGD to MYR contrast, it was RM2.30 to the Singapore dollar whereas now, it's way over RM 2.54 at the money changers.

Weaker Ringgit means they have to pay more to service their debts which are in SGD or USD and that is bad for the economy but good for those working across the causeway. I just pity those living in rural areas as they have limited resources and income in Ringgit working far lesser than the RM900 minimum wage and with this, will cause a hefty strain on them.

Prudence yes, but this is not the way. 

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