Firstly, crude oil prices have gone up tremendously in the past couple of years and our government can no longer sustain the subsidies. At the end of May, the local crude oil price was at USD138 per barrel, which is the highest in history. Our government has no control over crude oil prices which are determined by the supply and demand forces of the market. So, it's better for the subsidy to be channeled to other beneficial use.
Secondly, despite being an oil producer and exporter, Malaysia relies on foreign companies to in the costly and risky process of finding and producing oil from the ground. We do not have sufficient funding and technical ability to go at it on our own. In fact, it's typical to have joint ventures in the oil industry. In Malaysia, it's usually between the national oil company and a foreign oil company. In addition, fuel oil is not only sold by the national oil company but also by foreign oil companies. It’s impossible to force these foreign oil companies to sell at a price lower than the world market. So, the government has to pay the subsidy to these companies.
There isn't much that we can do except to use our fuel oil efficiently and effectively.
(246 words)
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