Diesel shortage getting worse in the West Coast

I blog about unleaded gasoline prices around the world recently, here.

I expressed my support for review of the fuel subsidy policy towards cheaper car prices with un-subsidised fuel trade-off. In a sudden twist of event, we quickly found ourselves panicking over shortage of diesel in the West Coast of Sabah.

I travelled up north yesterday and intended to refuel on my way, along Tuaran Road only to find myself completely disappointed as the first two gas stations on my route  have ran out of diesel early in the morning. Note: There seemed to be no problem with petrol supply - RON 95 and RON 97.

I demand an answer, too. An immediate one!

 The second gas station without diesel. "Sir, please come back tomorrow. Early morning"

Long queue near Tuaran township. Managed to refuel here.

At one of the stations, I was asked to come back early the next morning as they have "just ran out of diesel" moments ago. Mind you, it was only 9.30am and I am not sure how early would I need to come to queue up. They expect me to bring along my pillow, perhaps!


Reason for the diesel shortage

People speculated about the real reason behind the shortage as it is not the first time we have such problem concerning diesel. Speculation or not, someone has to answer and act quickly before the people start thinking that you are a lame duck.

Here is what some think the reason behind it:

• Limited amount of subsidised diesel. The Domestic Trade, Consumerism and Co-operatives Ministry only allowed a fixed amount of subsidy for a particular company to sell their diesel in a year, and once the subsidy is used up for that year, the oil company will be forced to continue to sell their diesel on a non-subsidised basis.

That means the company is actually subsidising for the consumers. Therefore, the oil company will rather not sell more because they will lose money.

• Possible abuse. The subsidised diesel is being bought to feed the industrial uses. The price of the industrial use diesel is much more expensive than the subsidised domestic use diesel. It is a no-brainer, there is big profit in selling the domestic use diesel to the industrial users.

TheGreenMechanics: The ministry concerned cannot put a blind eye on the issue because it is real, and it is not just some complaints from the opposition parties. I am directly affected as I travel quite a lot in my job and a dry tank does not help at all.

Please help!

IMF urges countries to cut energy subsidies

A case in point:
Malaysia's high car prices and subsidised fuel.

A 1.8E Toyota Altis (Corolla) would cost RM119,000 in Malaysia but only $18,180 (approx RM56,000) in the US. The difference is RM63,000.

We know that the fuel price in the US is much higher than our subsidised RON95 but the point here is that, we the consumers pay upfront subsidy of RM63,000. Take the government subsidy of RM0.82/litre (in the pic) and say you refuel 50litre/week, you enjoy subsidy of RM41 a week or RM2,132 annually.

If that is your refueling pattern, how long do you think the RM63,000 will last you? More than 20 years I reckon. So, would you support subsidised fuel or get a better car at lower price and manage your own fuel consumption. I think it is smarter that way.

The blanket subsidy that is practiced in our country benefits not the poor but the middle-income and the rich population. I read in The Star that 71% of fuel subsidy was enjoyed by the middle to high-income level groups (Source: Pemandu).

If it is up to me, I'd rather buy an Altis at RM56,000 and pay RM3.30 for my petrol; I'm still better off financially 20 years later.


Do subsidies on energy hurt the economy? And ultimately the masses?

"We have been hearing about countries that are finding that the fiscal weight of energy subsidies is growing too large to bear. In some countries budget deficits are becoming unmanageable and threatening the stability of the economy."
- IMF first deputy managing director David Lipton, in Washington.

Source: International Energy Agency, World Energy Outlook 2012, Energy Subsidies via IER website.

Cut subsidies on energy - says IMF

WASHINGTON – The International Monetary Fund urged countries to reduce subsidies on energy, saying they worsen government’s fiscal positions and eventually create more advantages for the wealthy instead of the poor.

In a broad-reaching report, the IMF said subsidies of oil, petrol and electricity are aimed at helping consumers, but end up costing them as governments struggle to shoulder the cost burden.

Moreover, the study said, subsidies encourage energy waste, discourage investment in energy-efficient industries, and exacerbate pollution and global warming.

Worldwide the direct subsidies on energy — when consumers pay less than the basic supply costs — amounted to $480 billion worldwide in 2011, according to the IMF.

If post-tax subsidies are counted — when the prices do not cover such things like the negative impact on the environment — the government support worldwide measured $1.9 trillion.

Most of the subsidies are in oil exporters, where they contribute to speeded-up depletion of a natural resource.But energy importers suffer especially as global oil and gas prices have risen over the past three years.

Many have not responded by adjusting domestic energy prices to match the increases — and so expanding the fiscal burden of subsidies, according to the report.

IMF first deputy managing director David Lipton, in an address introducing the report in Washington said that countries that have offered subsidies to help struggling populations “now find they suffer both fiscal paralysis and energy shortages.”

Lipton said 20 countries in the world maintain subsidies that top five percent of their GDP.Such subsidies “remain a stumbling block to higher growth by squeezing out much needed health, education and infrastructure spending,” he said.

But the report points out that, if post-tax subsidies are counted, the largest offenders are the United States, China and Russia — together their subsidies reach nearly $900 billion worth.
Source: Business Inquirer