Recently I was privileged to be one of the delegates in the 13th Asian Oil & Gas Conference, which was held in KL Convention Centre in Kuala Lumpur. Over 1,000 delegates from all over the world attended the conference and it’s the biggest oil & gas conference in the region. This conference was special because everybody was looking forward to serious discussions and views from the industry experts especially on the recent steep increase in crude oil prices that are impacting everybody in the world. What with the Malaysian government only last week increased the price of retail petrol by some 45%, the highest increase ever experience (see my previous article)
So what was new this time??
Like in any conference the keynote address on the first day and the speakers that follows will set the mood for the conference. The conference quickly turned into a fascinating West vs East showdown. It was apparent that the western ideology that was more superior in the previous conference was not so apparent this time around. Dr Tony Hayward, CEO of BP in his keynote address was candid in delivering his western world’s perspective of energy crisis when he said that this time around the urbanization that are taking place in Asian countries involved billion of people when compared to the European Renaissance which was about 50 to 100 million and about 200 million when American urbanized early in the 20th century. Therefore with this massive population involved obviously the energy required to meets these demands will be choking on the existing oil production thus painting a scenario of “there’s not enough energy to go by in the world today” and therefore “pay for these energy guys! Whatever USD per barrel necessary, you just have to pay for it”. So it means we Asian has to pay for this energy that we need!! So it’s the Western bully tactics again that we see here ??
Dr Jeffrey Currie, MD Goldman Sachs International UK, continued by “blaming” the crude price increased to “non-flexibility of funds movement in and out of the industry and in and out of USA due to government fiscal measures of producing countries. As a result the available fund was deployed in other industries elsewhere and these created a situation of not sufficient revolving fund within the oil & gas market worldwide and as such cut downs in oil exploration and development. He also said that now there’s so much pressure on USD due to the steep increase in crude price it is driving the US dollar down. Nice try Jeff, but is it really?? Any experts in economics that can help us here??? Please do comment on this statement as its very confusing to me!
I think the USD is weakened by internal economic pressure in the USA and just could not support the oil price anymore than it can and the sooner all of us understand the easier it is for us to approach this crude price issues.
We also learned that the world crude reserves have actually increased to 40 years and for natural gas reserves to 60 years and as such security of supply is sustainable. However we were also told that production could not meet demand and this shortage in oil supply has driven crude prices up and up and none of the panelist dared to predict to what level will it plateau off. So shall somebody predict??
I think it will increase to a level that China, India and the rest of us in Asian cant afford it anymore. So we will cut down on imports and stunt development. When this happens naturally the economic gap with Western countries will remain. You see, the Westerners just could not allow us Asian to catch up to their status. Japan has for so long shown us the way of Asian renaissance. Korea and the rest Taiwan, Hong Kong, Singapore and Malaysia, quickly followed this. Now when China and India get into the fray, the Western world just could not let it happened. What with combined population of 2.4 Billion, the 2 countries are like atomic bomb waiting to explode…. With consumerism that is!! There is just too much econimies to content with.
This is where Prof Kishore Mahbubani from Singapore tilted the conference to Asian perspective. What I explained above was his perspective brought to the conference. The conference hall was all silence, listening and understanding every-thing thrown by the professor. It was reckoned that by 2050, based on existing economic growth that the major economies in the world will be China, India, Japan and USA in that order. Where are the Europeans?? Interesting facts…indeed.
Where Asians will dominate will be in best practices. For so long Asians have studied, improvised and improved on the Western practices and will surge ahead and be unstoppable by the Westerns. Indeed Asian already has the technology, willpower and the financial resources to imitate and dominate the economies of the world. Billions of people duplicating these all over Asia will just be too much for the Westerns to bear. So the Westerners need to stop this march. One way is by controlling the energy price, starting with crude price. So for how long can we Asian afford the fuel cost. This is a conspiracy of the West and we need to understand them so that we can react appropriately. We need to persevere and collectively manage the economies so that we will continue to grow.
The West must gracefully share power with the East, said the professor. History he said taught us that the rise of new power almost always leads to tension and conflict. But this can be avoided if the world accepts the key principles for new global partnership spelled out in The New Asian Hemisphere. ( will check this out later)
So the conference has left me with different perspective of energy crises. There were so much more that was discussed; however I already understood the theme in the first day itself. I just hope that we will see better future to the oil crises. I can already feel the pinch in buying power as written in my earlier article.
Till I see you again…"have gas will travel" - Jebat-Siber
June 17, 2008
June 8, 2008
Petrol oh Petrol!!
Last Wednesday night I left office at 930 pm and was looking forward to a cup of coffee to wind down at home. I was supposed to be on leave but was called to office for urgent matter and didn’t bargain for a massive traffic jam in the city that night. It took me a while to realized the cause of the traffic snarl once I approached the 2 petrol stations along Jalan Tun Razak. The petrol stations were grid locked with cars spilling onto the main road queuing for their turn to fill up. Only that afternoon a friend sms’ed me that petrol price will increase by 50 cents after 12 midnight. I thought then that I would fill up later since I have more time and need to rush to this meeting of mine. How wrong were I then, with cars at frenzy trying to fill up there’s no way I will want to join these crowds for the sake of saving a few Ringgit that night. I would if I can, but that night was terrible and I am better off at home catching up with my family, what with the school holidays. I have to eventually fill up with the new price later anyway, I cant beat the system for too long, what with all the traffic chaos and the long wait I kind of feel that it’s not worth it.
Finally the government has made its decision to lift subsidy of retail petrol. However the manner by which the government was doing it was shocking to me, to say the least. With the sudden increase in fuel price it will have major impact to the people all round, from farmers to traders, to government servant to private industries, bankers and businessmen and all of us. It’s not difficult to visualize the chain reactions resulting from increased in fuel price. Just about everything around us has in one form or another are dependent on fuel.
As we got down in the morning for breakfast, the bread, egg, butter, jam, coffee will has impact in production and transport charges due to the increased I fuel price. I recently noted that a trolley-full of grocery shopping in Giant hypermart will cost me RM 400+ compared to RM 300+ a year ago. Not too log ago it was RM 200+. Now with the recent increase in fuel I am anticipating a RM 500+ for the same trolley filled up with groceries. I am a medium size family and the groceries will last me a month on normal consumption. I have been using this benchmark for years and its kind of my consumer index heh..heh. I am not savvy enough to compare prices of each single item; therefore a trolly-full will do for me. Also my heart is not very strong to go through ten’s of items in the shopping bags and cringe at every time I see an increase in item’s prices. So there’s my basic analysis based on trolley-full of groceries.
Lat week RM 100 will last me a week’s petrol for going to work and return. Now with the 39% increase in fuel I anticipate that I will now need RM 140/week for fuel. Using the same formula all over I will see a reduction of at least 30% of my buying power with the same salary I am getting. With average increment of at best 10% per year I will need 3 years to return to the same buying power as before. However the world is not an ideal place, therefore with other factors thrown in such as unstable world economy, crash in stock market, further increase of fuel price, continuing war in the world especially in Arab countries, etc it’s unlikely that I will enjoy the same buying power again. So overnight I, like the majority of people in the country will be poorer by 30% all due to the government increasing the fuel price.
Like I said its not difficult to visualize the domino effects of fuel price increase with price escalations of foodstuffs, water, electricity, bus fares and fares of all forms of public transport, clothing, services etc and very soon inflation will creeps in. This will be going on for a while and government will be doing its bits to institute price check, price control, price campaign etc. However the fundamental law of economy can’t be restrained for long and very soon the Government will caved in to trade unions call for salary increase for government servants. This will always be followed by similar increase in the salary of private companies and the vicious circle will just goes on and on… and all round there will be increased in cost. Therefore with the overall increased in prices of goods and services the Government and the industry at large will be paying for higher cost for new projects, development, initiatives etc. Therefore is lifting the petrol subsidy worth it in the overall scheme of thing??
I am not an economist and all the scenarios above are based on logics and a bit of experience acquired through my work experience thus far. However it just seemed that the Government has been hasty in its approach in managing the country’s economy. With Malaysia being net exporter of crude oil, I am sure the country can withstand the world-wide crude price escalation a bit better than other countries that are non oil producers and who are also net importer of crude. The Government should have more flexibility in managing this issue (compared to others such as Singapore, Vietnam, Philippine) and should have taken a wiser approach that will benefit the country in the long run.
As we braved ourselves for a “teh-tarik” that will cost us RM 1.50, basic nasi lemak for RM 1.60 to RM 2.00, a roti canai for RM 1.50 etc, we hope that somebody in the present Government will be brave enough to call for a change in the economic strategy of the country. I cringed to think that our finest days are over and that Malaysia will never be the same country to live again….Ya-Allah Selamatkan Kami dan pelihara lah Kami….Amin!
Jebat_Siber
Finally the government has made its decision to lift subsidy of retail petrol. However the manner by which the government was doing it was shocking to me, to say the least. With the sudden increase in fuel price it will have major impact to the people all round, from farmers to traders, to government servant to private industries, bankers and businessmen and all of us. It’s not difficult to visualize the chain reactions resulting from increased in fuel price. Just about everything around us has in one form or another are dependent on fuel.
As we got down in the morning for breakfast, the bread, egg, butter, jam, coffee will has impact in production and transport charges due to the increased I fuel price. I recently noted that a trolley-full of grocery shopping in Giant hypermart will cost me RM 400+ compared to RM 300+ a year ago. Not too log ago it was RM 200+. Now with the recent increase in fuel I am anticipating a RM 500+ for the same trolley filled up with groceries. I am a medium size family and the groceries will last me a month on normal consumption. I have been using this benchmark for years and its kind of my consumer index heh..heh. I am not savvy enough to compare prices of each single item; therefore a trolly-full will do for me. Also my heart is not very strong to go through ten’s of items in the shopping bags and cringe at every time I see an increase in item’s prices. So there’s my basic analysis based on trolley-full of groceries.
Lat week RM 100 will last me a week’s petrol for going to work and return. Now with the 39% increase in fuel I anticipate that I will now need RM 140/week for fuel. Using the same formula all over I will see a reduction of at least 30% of my buying power with the same salary I am getting. With average increment of at best 10% per year I will need 3 years to return to the same buying power as before. However the world is not an ideal place, therefore with other factors thrown in such as unstable world economy, crash in stock market, further increase of fuel price, continuing war in the world especially in Arab countries, etc it’s unlikely that I will enjoy the same buying power again. So overnight I, like the majority of people in the country will be poorer by 30% all due to the government increasing the fuel price.
Like I said its not difficult to visualize the domino effects of fuel price increase with price escalations of foodstuffs, water, electricity, bus fares and fares of all forms of public transport, clothing, services etc and very soon inflation will creeps in. This will be going on for a while and government will be doing its bits to institute price check, price control, price campaign etc. However the fundamental law of economy can’t be restrained for long and very soon the Government will caved in to trade unions call for salary increase for government servants. This will always be followed by similar increase in the salary of private companies and the vicious circle will just goes on and on… and all round there will be increased in cost. Therefore with the overall increased in prices of goods and services the Government and the industry at large will be paying for higher cost for new projects, development, initiatives etc. Therefore is lifting the petrol subsidy worth it in the overall scheme of thing??
I am not an economist and all the scenarios above are based on logics and a bit of experience acquired through my work experience thus far. However it just seemed that the Government has been hasty in its approach in managing the country’s economy. With Malaysia being net exporter of crude oil, I am sure the country can withstand the world-wide crude price escalation a bit better than other countries that are non oil producers and who are also net importer of crude. The Government should have more flexibility in managing this issue (compared to others such as Singapore, Vietnam, Philippine) and should have taken a wiser approach that will benefit the country in the long run.
As we braved ourselves for a “teh-tarik” that will cost us RM 1.50, basic nasi lemak for RM 1.60 to RM 2.00, a roti canai for RM 1.50 etc, we hope that somebody in the present Government will be brave enough to call for a change in the economic strategy of the country. I cringed to think that our finest days are over and that Malaysia will never be the same country to live again….Ya-Allah Selamatkan Kami dan pelihara lah Kami….Amin!
Jebat_Siber
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