28 September 2008

Petrol Prices Down By 10 sen But Inflation Remains

Dear Reader,

Petrol and diesel prices have come down by 10 sen since last Thursday (24th September 2008). The new prices are now: RM2.45 per litre for petrol, and RM2.40 per litre for diesel. (Ref: Forbes, Malaysia Cuts Petrol, Diesel Prices - Minister, 24.9.2008) Yet, inflation remains its highest in 27 years for this nation at 8.5% since July.

Bloomberg further reports on the inflation. (Ref: Bloomberg.com, Malaysian Inflation Holds At Fastest Pace In 27 Years, by S. Phang and R. Pakiam, 24.9.2008) According to the report: "Consumer prices rose 8.5% from a year earlier, matching July's gain". A Singaporean research center, Action Economics, expected inflation to ease from the reduction of oil prices.

Recent events have gone to show that times are toughening up. The US credit crunch has led to the closure of large corporations, like Bear Stearns, Lehman Brothers, and Merrill Lynch.

According to a press release by Bank Negara Malaysia (Malaysia's central bank), Monetary And Financial Developments (August 2008), the 8.5% inflation reflects increases in food and transport prices. A friend of this writer has pointed out that food and transport prices are not likely to lower, even if petrol prices are lowered. The BNM report further states that the Ringgit has slid downward 4.8% against the Dollar between 1.8.2008 and 25.9.2008.

Where to from here? Leaders in the Malaysian Government at this point of time will be more concerned with their internal political party elections. It appears as though it may be a no-win situation for the embattled Prime Minister who has already lost public confidence terribly in the last elections. At this point of time, the government may not be ready to consider implementing carbon taxes, what more when suggestions like Race Relations Act initiative being viewed as redundant. (Ref: New Straits Times, Tan: Law On Race Relations Not Necessary, 28.9.2008) Canada is at the moment grappling with the introduction of a carbon tax. (Ref: GlobeAndMail.com, Distortion, Incoherence In The Carbon Tax's Wake, by J. Simpson, 26.9.2008)

The question that must be considered is how much more will petrol prices go down, internationally, and nationally. For as much as we rationalize it, the price of petrol ultimately affects the prices of goods and services, as service providers and traders continually seek to pass on the pinch in their pockets to their clients. Granted, there are industries that depend less on petrol, but ultimately petrol is a topic close to everybody's hearts, including employees of software companies, janitors, hawkers, etc. Perhaps the time is right for a carbon tax?