00:10hello and good evening i'm melissa idris welcome to consider this this is the show where we want
00:16you to consider and then reconsider what you know of the news of the day with global oil prices
00:22surpassing a hundred dollars per barrel policymakers are now under pressure to balance
00:26rising subsidy costs against inflation and public expectation so the government has already moved to
00:34adjust fuel subsidies but the question remains whether or not that goes far enough so tonight on
00:41the show we'll explore just how exposed the malaysian economy is and whether we have the fiscal
00:47capacity to weather a prolonged period of high energy prices joining me on the show to help me
00:55think through these topics is dr nung sari amad radi who's the chairperson of kazana research institute
01:00dr nung sari always great to have you on the show i'm i like i like to begin our conversation
01:06maybe
01:06by getting a um your your take how do you understand the current situation in terms of how serious it
01:14is
01:14for our economy i'm just wondering whether you think policymakers are are reading the risks
01:20risks correctly um at the right level of urgency oh i i think uh the i mean in a nutshell
01:29what we're
01:29having uh out of the war in the gulf uh in iran is actually two things there's an immediate price
01:39impact on the prices of uh crude oil as well as gas and other things that that uh complements to
01:45those
01:45things like price of coal have gone up as well uh and that's the immediate thing and then the
01:51secondary thing and perhaps the more uh more challenging uh thing is actually the lack of supply
01:57itself because once you don't have uh flows of oil and gas coming out of the gulf uh most economies
02:05to
02:05the east of the east of the gulf and that includes us uh is having uh shortages of uh crude
02:11oil as well
02:12as gas uh but globally uh the impact is actually uh via the price mechanism so we're having uh i
02:20mean the
02:21war has created this thing is it's far away from us but it is a very serious uh serious uh
02:27problem it
02:28depends um uh very much on the the the length of this conflict and it also defend depends very much
02:37on
02:38the damages that has been done on on on oil and gas infrastructure because even if the the thing this
02:45this war stops today this later this this afternoon it will take months before uh supply normalizes and
02:53hopefully prices will normalize so we have both uh a price issue as well as uh which therefore translate
03:01into cost which includes as you've alluded to cost of subsidies and so on but this is also a real
03:07supply issue we're not getting uh supplies especially countries or economies to the east of the gulf so
03:14it's a serious issue very seriously if if i may zoom out a bit and maybe go back to basics
03:19because
03:20malaysia is both is both an oil producer and an importer a major importer of refined fuel i i'm just
03:25wondering how this this duality complicates malaysia's um exposure in net terms do we benefit from high
03:33oil prices or do we um or do we not no i mean from uh we import um about about
03:4425 of our our our
03:47requirements in terms of production i mean as a whole let's put that in perspective uh as a as an
03:52economy um we use more crude than we produce so that's that's what it is right so in other words
03:59we have to import crude um and uh we import about 25 of our requirements of course our requirements is
04:07more than our own production and of course we produce crude oil by some issue talk to the petronas
04:13guys but as as i understand from briefings we produce a different sort of crude which are actually
04:18light crude the tapis is a light crude and those fetch higher prices and so we sold them we basically
04:26sell them and we import heavier crude so all our refineries most of our refineries are built for
04:33those type of crude uh so we need to we need to have those crude in order to to refine
04:39them into
04:41downstream products you know diesel and petrol jet fuel and and so on so the challenge here is actually
04:48uh securing uh the crude that we need to put in our refinery infrastructure so uh to your question
04:56whether we are we are a net importer of crude just to be just to be clear on that uh
05:02but whether we benefit
05:03more uh from increase in prices or we we we we incur more losses um i'm i'm perhaps on the
05:13um having
05:15the government perspective so actually it's on the cost side so for for for the government it's very clear
05:21that this imposes a very high cost on on on subsidizing those uh pump prices that we have the budi
05:2995.
05:29um well so the government's already gone and uh has announced measures to uh reduce the standard
05:38monthly entitlement of budi 95 um and the prime minister has said that malaysia has enough petroleum
05:45supply to meet domestic demand until at least may so the subsidies will maintain till then but you know
05:51we priced the subsidy cost that was forecast on oil being 60 65 dollars per barrel is now over a
06:00hundred
06:01um is it sufficient that announcement to just minimize slightly the round 95 petrol subsidies is that
06:08sufficient to alleviate whatever fiscal pressure that may be building with the high oil prices should we
06:15be doing more should the government be doing more dr nung sorry to um reduce the subsidy bill yeah because
06:22let's assume for for discussion purposes let's assume that revenues remain the same in other words we're
06:30not gonna we're not put in place new taxes or whatever uh to to raise revenues let's say we have
06:37a revenue cap
06:38so now i think they're monitoring uh the extent to which this crisis uh extends uh they will come to
06:46a
06:46point i think right now the first step is to reduce uh to to address the issue of supply first
06:51right to
06:51lengthen the supply you said the pm announced that we have enough until may so we need to lengthen that
06:57that that that thing and the way to lengthen that is actually by reducing consumption right so we've reduced
07:02from 300 to 200 they might go lower depends on the circumstances and of course the other liver uh
07:10apart from the quantity side is actually the cost side which is actually the price side so right now i
07:16i
07:16i was looking so i'm a uh unashamed uh user of budi 95 was looking at my my my app
07:24i filled up 36 uh liters uh
07:27yesterday uh uh and half of uh i only pay half of the total cost so i i think uh
07:35on the price side of things
07:37this 199 as you said which was derived that and when when crude was about 65 and it's now almost
07:45double and
07:46more than 40 percent uh may it may not be sustainable if we go go go forward uh with this
07:53current regime
07:54uh assuming of course uh revenues are fixed so there will be decisions that have to be made on
08:01trade-offs right if we have the same amount of revenues it depends very much uh if we want to
08:08keep on supporting the prices uh then the question becomes how much can we support uh in terms of price
08:15costs and how much uh can we support in terms of quantity as well well this is you're absolutely right
08:23that there are very tough decisions ahead for policymakers um and i i do hear or feel the um
08:32urgency or even panic coming from from the public when uh policymakers are faced with these trade-offs of
08:40having to balance between rising cost of living and needing to cushion households from that whilst preserving
08:48fiscal discipline in the face of of financial constraints um for the country how what are
08:55the trade-offs here because clearly you know you don't want to let prices increase too much while at the
09:01same time there's a ballooning subsidy bill yeah so i i think i think i mean in the first instance
09:07i i don't
09:07think i think the government is um i think managing it in in a way that not to create a
09:14panic reaction
09:16we we don't want people to be queuing up at at gas stations you know trying to uh fill up
09:22their
09:22tanks uh and whatnot uh so that's that's not good but but there should be enough injection of reality
09:30into into decision makers whether they are in households or firms that make them aware that is the
09:38the potential the possibility of actually either more rationing on quantity being subsidized or or
09:46increase in the price even though it's subsidized price in other words adjusting the amount to be
09:52subsidized the trade-offs that you alluded to you know if we assume fixed revenue then then they have
09:58to come to a point where uh if you spend so much on this you have to take it it
10:05away from other
10:06expenditures so that's the trade-offs right there are other expenditures and besides paying
10:13gaji pension and so on there are other expenditures that the government needs to to spend on so those are
10:19the other trade-offs you know you government has to buy medicine for for for kementerian
10:25kesihatan and government supplies for kementerian uh uh apa nama pelajaran and you know government
10:32themselves are major consumer of petrol you know otherwise the police cannot be patrolling the ambulance
10:38are not working um all the whatever the coastal vessels are not working so those are the trade-offs
10:44that needs to be made i think that they're progressing uh by looking at the situation day by day but
10:52uh like i said even if things are resolved today uh assuming there's no more damage to the
10:57infrastructure in in the gulf it will take some time to to recover from this and we are in no
11:03we
11:03have no control over this perhaps we should be looking at other sources of crude in this side of
11:10the world but in this side of the world nobody is producing crude except perhaps russia right dr nusar i
11:16really like the phrase that you use the we need an injection of reality it's wonderful um so what
11:23advice do you have for for our audience tonight who are trying not to panic but also require this
11:30injection of reality what would you um what would you advise uh our audience tonight in terms of preparing
11:37for the uh economic risks ahead yeah i i think these are extraordinary times actually although we don't feel
11:46it but it's extraordinary times in terms of its fundamental effect on the most fundamental uh
11:52input in the economy which is actually energy so so that's that's the reality i mean there's no
11:57point sugarcoating that so so from a household point of view i think we should be we should be
12:02conserving we should be we should be not spending we should build up reserves you know individual
12:08household reserves uh just in case we need to expand a bit more for firms uh be quite a challenge
12:14because uh
12:15firms that are especially domestic firms small or small medium enterprises micro enterprises uh
12:23there might be second order effects that come in uh if if if a few uh keeps at the cost
12:31that it is
12:31like now uh and and we need to uh i mean conservation is one i think i think the longer
12:38term thing uh
12:39uh is to actually look for alternative stuff i i i i find it such an irony that mr hydrocarbon
12:46mr trump
12:47is actually pushing the energy uh agenda sustainable agenda quite forcefully to the world uh that we
12:55need to be looking at other sources of uh energy and green energy alternative sources of energy otherwise
13:01this whole thing will keep on uh repeating again and and what it what's your sense of how long how
13:09prolonged this could be you mentioned that even even if it's uh if it ends this afternoon we might not
13:15see a recovery in energy prices for a while so what's your sense of how prolonged this crisis is
13:20i don't know i think i think trump is uh will only respond to economic uh market sort of signals
13:26and i think
13:27he knows very well that uh i think pump prices in the u.s are not subsidized i think it
13:32has gone i think more than uh
13:35four dollars now uh and i think there will be a lot of pressure over the weekend you've seen all
13:40kinds of
13:40demonstrations in the u.s itself to put pressure on but i don't know how he's gonna get out of
13:45this
13:45thing you know it's as much iran's call as it is uh the u.s calls um uh for people
13:53like us small economy
13:55that has both we are in better shape than than quite a lot of our neighbors because we have our
14:00own supplies
14:01at least uh so i think people shouldn't panic but people should also be be really realistic in
14:08anticipating that the extraordinary times call for extraordinary measures and sometimes of you know
14:15junctions like this calls us to alter our behavior i mean we can't be having you know melissa we have
14:22800 000 new cars every year um we can't be doing that uh we need to change from that maybe
14:31we should be
14:32this is the time to look at public transportation things of that sort apart from uh renewable energies
14:38alternative sources of energy so those those sort of longer term things as well as shorter term things
14:45shorter term things is just to prepare for for a bit more to build cushion uh padding i understood yeah
14:53there is a an opportunity for reform here in this crisis dr nung sari thank you so much for speaking
14:58to me
14:59dr nung sari ahmad radi from kazana research institute we're going to take a quick break
15:03and we'll be right back on consider this stay tuned
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