A case of too much, too soon

Malaysia yesterday raised the prices of petrol nationwide by 40 percent and resulted in widespread unhappiness with the BN. This move is supposed to help Malaysia save billions every year in terms of subsidies which had kept Malaysian oil prices one of the lowest in the world. However, no doubt, this is a move that will incur the wrath of the common folks who felt they had their carpet pulled from under their feet. And at a time of rising inflation in all sorts of goods, having the price of this important commodity raised by 40 percent at one shot suddenly is like getting hit by a cyclone after getting hit by an earthquake.

This will no doubt be a big risk move by BN following their recent election loss, and in the short term, it will seem to be a outright suicidal move that could see a bigger shift in popularity to the opposition. However, if the central government is able to pull this off, I foresee that Malaysia's economy will do really well as the move will save it billions of dollars which can be put into its reserves to strengthen the economy and propel it to a more prosperous future. Otherwise, the situation can end up like the one which threw Indonesia into a turmoil about 10years ago, and most likely, "some heads will roll".

This makes me wonder why didn't the Malaysian government implement this in tiers instead of raising the entire 40 percent at one go? What I mean is that they could have raised the prices of petrol by 10 percent for a few months, and then another 10 percent and so on, instead of making citizens feel the full brunt of the price hike at one go? Or could this imply that 40 percent is the first tier, and further hikes are still on the horizon? This could be logical considering prices of petrol are still cheaper than in Singapore, and Singaporeans will still be willing to make the tour across the causeway to get cheaper petrol from the kind Malaysian government which has scrapped the plan to ban Singaporeans from buying petrol within a 50km radius from the border. Nonetheless, this was a necessary move that would become unsustainable as there seems to be no quick end to the rising oil prices.