A Silent Lamentation

The last time I wrote about a petrol price hike, it was in 2006, and today, effective midnight, prices of unleaded petrol will go up by 78 cents to RM2.70 per litre.

Before 1990 - RM 0.89
Year 1990 - RM 1.10 (up RM 0.21)
01/10/2000 - RM 1.20 (up RM 0.10)
20/10/2001 - RM 1.30 (up RM 0.10)
01/05/2002 - RM 1.32 (up RM 0.02)
31/10/2002 - RM 1.33 (up RM 0.01)
01/03/2003 - RM 1.35 (up RM 0.02)
01/05/2004 - RM 1.37 (up RM 0.02)
01/10/2004 - RM 1.42 (up RM 0.05)
05/05/2005 - RM 1.52 (up RM 0.10)
31/07/2005 - RM 1.62 (up RM 0.10)
28/02/2006 - RM 1.92 (up RM 0.30)
05/06/2008 - RM 2.70 (up RM 0.78)

It's a massive 40.6% increase, and more price upside to be announced in August this year. Going by what has been previously announced, that prices of petrol will reflect global prices by August, that means there is at least about another RM1.00 to go in August.

Sure, the Government announced subsidies, and no details as yet at this present moment in time, except that there will be a yearly subsidy of RM625 if the vehicle is below 2000cc (which luckily, mine is just below that mark). Probably subsidise via road tax payments I reckon, but hard to say.

Following the price hike in 2006, we noted that the Consumer Price Index (which measures inflation), rose by about 0.53% for every 10 cents increase. Looking at it at a simplistic level, assuming that the CPI is now about 3.00% (due to heavy subsidisation), the CPI might very well hit 7.1% just on this petrol price increase, and thus is more reflective of current regional inflationary numbers (heck, even Singapore has an inflation rate of over 7.00%).

In 2006, petrol prices were about US$40 per barrel, and today, has hit above US$125. At that time, one of our internal oil and gas sector analyst predicted prices will hit US$100 and we heard with some disbelieve. His analysis was based mostly on demand and supply theory, but I guess the recent spate of bullish commodity as an asset class have pushed up prices above what may be fundamentally not right. Many have said that this is now an asset class which is hitting a bubble, and before you know it, the bubble will burst and prices will come a tumbling down, creating another round of financial crisis. Beware the commodity funds! As we like to remind ourselves in our line of work, "Be fearful when others are greedy, and be greedy when others are fearful".

One direct repercussion is that transportation costs are going to go up, be it for private vehicles or for public transport. However, I think the ramifications are more severe, especially the knock on effects on the prices of other goods and services. Already, news of several airlines in other countries have gone bankcrupt, unable to cope with the rising petrol prices. How many other sectors are going to be hit?

Mentioned to my colleagues just now upon hearing the news of the 78 cents hike, that my lunch pocket money is limited to RM5 per day, now I need to tighen my belt somehow and reduce it to RM4 per day. But with food prices going up? Even eating lunch in this day and age, I noticed that portions are getting smaller, or for the same amount of food taken, the vendors charge a higher price. Food prices have risen, along with prices of other commodities. You know how much rice costs nowadays? So waste not, want not.

After all that though, we are like children given a toy (petrol subsidy), and once the toy is taken away, there will be a whole lot of hullabaloo, but after a while, acceptance will be there. How spoilt can we be? But then again, we are not talking about toys here, but our own livelihood and the choices we make in our everyday spending patterns.

I remember something which my company's Human Resource staff once said which didn't sit well with me, that our yearly salary increment is based on the inflation numbers. I hope this time, they practice what they preach and adjust all our salaries higher in line with our fall in purchasing power. But alas, that is another year to go before we see any such adjustments.

Is that the end for today? Alas, also announced is that electricity prices will also be going up... Sigh...