(EnergyAsia, May 29, Thursday) — Malaysia’s estimated oil reserves of three billion barrels could run out in about 10 years on current production and consumption trends, putting pressure on the government to make much better use of oil revenues while they last.
Seeking to raise domestic oil prices as they are now heavily subsidised, Domestic Trade and Consumers Affairs Minister Shahrir Abdul Samad explained that the Malaysian government relies heavily on royalties and payments from state oil company Petronas to support its budget.
Much of Petronas’ contribution to the state budget now goes to subsidising basic food items and fuel. Malaysia subsidises more than 20 daily food items including milk, salt, flour and sugar.
With rising world oil prices, the subsidies have been increasing at an alarming rate as Malaysian domestic fuel consumption has continued to expand.
Mr Shahrir said the government is set to spend around RM45 billion on fuel subsides this year alone with US crude futures hovering around US$130 a barrel. (US$1 = RM3.21).
He said the country’s artificially low fuel prices have encouraged traders to smuggle fuel to the export markets. Poor families, the intended targets of the subsidies, are unable to get supplies.
Agreeing with him, economists said the money spent on fuel subsidies would be better invested in developing the country’s infrastructure, education system and helping the poor pay for their food.