40% fuel-oil price hike in Malaysia

Prices of vehicle fuel are going up from RM1.92 to RM2.70 per litter.

I've wrote so much on the subject of oil subsidies

Cost of producing oil is cheaper than price of subsidized oil
Subsidizing oil just because we're net exporter
Oil dry in 2012
(latest estimates put us as a net importer of oil by 2012, not that our oil is gonna be completely dry out, a technical impossibility)


They are all for petrol subsidies to be cut. The main reasoning here is that subsidies actually cost us more than if there were no subsidies. Subsidies artificially inflate demand, low prices promotes people to drive more, increasing further the size of the subsidy. This excess consumption/demand is wastage. More elaboration can be found on the above posts.y

I am for cutting subsidies. I am very happy with this subsidy cut. However, I believe that the sudden huge decrease in subsidies is a mistake. I have reservations about how the money should be used, in which I believe that all of the money saved should be returned to the people in the form of tax-cuts, since taxes cause economic inefficiency in the first place. There is also the reasonable worry that the savings would be used to fund projects that are prone to corruption.

The Abdullah Ahmad Badawi Administration have done a lot of totally dumb stuff. This however, isn't so. It has been advocated by the experts for a very very long time (thus the fuel taxes in the west). There's a lot about it written in the academia. Definitely a big plus for the idea we call sustainable growth. It is probably the single best policy the nation has ever had since the start of the Mahathir administration.

The weird thing is, why is the government doing this when it is already so unpopular? Everyone knows that such policies, though may be good for the nation, will never go well with the lay person that is more for populist policies. Why aren't they doing things, like giving out goodies by going into a budget deficit (which Mahathir did and no one cared) to improve its approval ratings?

These kinds of unpopular stuff are usually done when one is going to leave the political scene. Mahathir waited to the time when he was leaving to change the medium of instruction of science and mathematics to English. He knew well that it won't be too popular, especially in UMNO, even though the idea was, many held, a good thing for the nation.

Many claim that Pak Lah needed to dispense the money for this political leverage. I hope not, but even if it is for that purpose, when Pakatan Rakyat takes over, they now can use this money rather than it tied up to the subsidies because they won't have the guts to pull it out anyway. When that happens, I seriously hope they won't reinstate these subsidies again.