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Saturday, June 28, 2008

WARNING: Oil Will Go to RM3.20 by End Of Year

"In these times, it’s always a good idea to prepare for the worse and not trust the government’s words at all."

I really hope I am wrong, but this information is just too hard for me not to share with people. Apparently, with price of oil increasing in the international market, the subsidy supported by the government increases more and more.

And apparently, the state of our country’s finances is getting from bad to worse. At least that’s what my source in the MOF are telling me. There is no way the government can sustain the subsidy at this rate by the year end, should the rise in International Oil keep on increasing. Years and years of corruption have began to take it's toll on Malaysia's finances.

At this rate, the government will not be able to sustain the subsidy without widening the budget deficit. It’s already tanking at 3% and should the oil subsidy be maintained by year end, our budget deficit might ballon up to 6-7% of GDP, at least that’s what my source is telling me.

I think the exact words used by my source were “the country is going to the dogs”.

So, my friends, I wish I am proven wrong on this one. And I know Pak Lah and Najib has given their utmost assurance that oil prices will not be increased at all this year, but we know how good these people are at keeping promises.

Also, apart from Pak Lah and the government, the Bank Negara also has a tradition of issuing “credible” statements. My friends in Bank Negara tells me that very few in Bank Negara actually believes in the data published by Bank Negara. In these times, especially the the inflation rates published by Bank Neagara are NOT to be trusted. I think Zeti, our Bank Negara governor, is trained to issue crap statements with a straight face.

In these times, it’s always a good idea to prepare for the worse and not trust the government’s words at all. For instance, I’d like to propose u go to your local grocery store (sundry store as he British calls it) and hedge your food prices. Have this type of conversation with the owner and sign a document. Tell him:

You : Allow Mamak, sekarang saya mahu bayar deposit, tapi saya mahu ini harga barang makan mcm milo semua aaa takda ubah sampai taun depan. Saya aa sini jugak beli takda tempat lain tapi itu harga aaa tarak buleh naik. Buleh ka mamak?

I say now’s the time to take out your deposit and hedge everything: rice, sugar, milo, coffee, tea, mineral water etc. I know some of the items above a controlled item, but it seems the real prices always more than the government controlled price.

You can also go to your barber and hedge prices of haircuts, your school bus operator, your tution center for your kids, your motor oil change mechanic, your mechanic for car maintenance. Hell, why don’t you try hedging with your Nasi Campur and your Roti Canai Kedai Mamak. For all u know they might agree and u could save a bundle in the future.

The point is, try to hedge as much as possible. Your offer is that you will keep coming back to them without fail provided they can offer you the same price you’re enjoying now until the end of the year.

People who says that this idea is weird should ask Southwest Airlines. They’re flying high right now because their executives are forward thinking and hedge everything before the rise in oil prices.

In addition, I think we also need to make several adjustments now before the real storm starts to hit. Steps like:

  1. Renegotiate your loan or refinance your housing loans for a lower rate. Or change to an Islamic Loan because the rate is fixed. There’s no telling what will happen to our interest rate in these coming months.
  2. Install an NGV system into your car. For more information refer to my previous article “Experience Of Having NGV in the Car.”. I also have a CBOX open in this blog for anyone having questions on NGV and try to answer them the best I can
  3. STOP USING YOUR CREDIT CARD. Pay off your credit card completely. Get into one of those programs that allow you to pay your credit card debt at a reduced rate or a longer length or both.
  4. Reduce your debt AS LOW AS YOU CAN. The best is for you to be left with just one debt, your house.
  5. Hedge everything you can. Don’t get yourself subjected to market prices.
  6. Migrate to Taleban Country. Check it out “Life in Taleban Country pt 3”. Gasoline is cheap (SR0.68 per liter = RM 0.50). All businesses are thriving here.
  7. For Muslims, learn to fast because u may need to cut down on luxuries like lunch and breakfast. Unless you’ve already hedged your prices with your local mamak store. (For Non Muslims, why don’t u try fasting. It’s not a coercion, but it will save you money.)
  8. Hedging is also good if you’re a business owner. Also, cut cost wherever you can. Print on used paper, buy low grade coffee or tea, use powdered tea instead of tea bags, stuffs like that. Allocate one whole day just for brainstroming session on effective cost cutting measures.
  9. The consumer spending rate WILL GO TO HELL. And so will your business if you're not prepared from now.

Even in the States, they’re already predicting a USD6 per gallon scenario by year end and USD7 per gallon by end of next year. So, in the case of Malaysia, it’s not going to be far.

But one thing for sure, the cronies and UMNOPutras are IMMUNE to these inflationary pressures because they can always turn to government money to ease their burden. We, the people have not such luxury and we are to survive whichever way we can. Remember, our export level is maintained or even improved. Our GDP are not effected by these changes of oil prices. So, these profits must go somewhere? Right?

Lastly, the best way to do something about this is to remove Barisan Nasional completely. Corruption is taking it’s toll on the people. And the toll with keep rising. People will keep on suffering, while the cronies and connected richer.

I can only write and proposed. I pray to God that the Malaysians are protected from harm due to inflationary pressures.

Tulang Besi

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  1. Yeah it is not impossible... looking at the way the world oil prices has continue to rise, I think it is only logical that we expect the worst.

    If the government really want to remove the subsidy, the government also need to established an open market for the retail petrol and diesel to reflect the rise and fall of the oil prices...

    Another issue is that the government really need to look at the current tax structure, because at RM3.20 per liter, a RM3000 per month salary is definitely can be considered as a lower income group and may need to be exempeted from taxes...

  2. letting the time pass me by,

    Welcome to Malaysiawaves.

    I agree with you. I think your suggestions are very good. Deregulate petrol prices.

    But I think we should go down that road yet. I want the regulation to remain, so that we can charge windfall taxes to commoditties companies.

    After the price of oil, at least level off, then we can deregulate oil prices.

    Also, I think the government need to consider not just by average salary drawn, but also by size of family and no of dependence.

  3. Credit card debt is on its all time high with today's economy. Hopefully people can obtain the help they need to get out of debt. Thanks for the article!

  4. Credit card debt is on its all time high with today's economy. Hopefully people can obtain the help they need to get out of debt. Thanks for the article!

  5. hey i think this will be possible because the oil prices is falling rapidly and not in arise.

    Credit Card Debt


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