Now oil prices have reached $130 a barrel, the problem starts to affect more than commuting car drivers and budget airlines. Countries like Malaysia, Indonesia and others that heavily subsidize their fuel start to run in trouble. A 2005 article in the Herald Tribune said that an oil price of $65 a barrel would spell big trouble for the Indonesian economy. After the price of gas was increased with 126%, riots broke out in Jakarta and elsewhere. The article never mentioned what $130 a barrel oil would do with the budget. Last month the price had to be revised again resulting in students taking to the streets in protest. I wonder where they get the money to buy a car in the first place?
Malaysia has found another way. Instead of raising the price of fuel, which would make the government undoubtedly unpopular, a wise committee thought long and hard about it and decided that the cause of inflation wasn’t domestic but had to lie with the foreign fuel smugglers. All those rich Singaporeans lining up at the Malaysian pumps were apparently stealing a significant portion of the 56 billion Ringit subsidized fuel. The first idea was to issue every Malaysian a pass to buy subsidized fuel. This turned out to be an expensive and fraud prone project because there are 24,821,286 people living in Malaysia that all would need a pass (or at least the ones old enough to drive). So they decided to outright ban foreigners from buying fuel at stations closer than 50km to the Thai and Singaporean borders.
The committee might have thought a bit longer about this. Singapore has a law that makes it illegal to pass the border with a tank that is less then 3/4 full. Let’s assume that an average fuel tank holds 70 liters. That means that the average Singaporean family can top up their tank with 17.5 liters of sweet subsidized fuel before returning to the land of Laksha and expensive fuel. At the same time this family will probably have lunch and even dinner in Johor Baru, fill the trunk with cheap fruit and vegetables and other groceries, have an ice cream or two or even spend some time at Genting, Malaysia’s version of Vegas. I know how these things go, whenever you’re abroad you always spend more then you intend to. Already the results are visible at the borders with Thailand, where tourism has died down to a trickle. The same will probably be true for Johor, because although the cheaper gas might not have been so cheap after all the extra spending; it’s still a major attraction for thrifty Singaporeans. I wonder how long it will take before the local Johorans will be lining up to buy just a bit of extra gas to sell to Singaporeans and other foreigners. That way the subsidy flows directly into the pockets of the needy. All outside the official gas stations off course…
Fortunately the measure will be effective against the many, many trucks of fuel that were smuggled into Singapore each day. They must have been camouflaged because I’ve never seen them cross the border….
Update. The Malaysian government must have thought a bit longer and decided that increasing the price of gas with 65% will help them a bit more than banning foreigners from buying gas. So far, the country remains quiet...
Update2. Demonstrations are planned this weekend in Kuala Lumpur. Off course this was to be expected.
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