00:10Hi, welcome back to Consider This. I'm Melissa Idris. Let's continue our discussion about the
00:15uncertainty in the global economy as oil prices climb on the back of escalating geopolitical
00:20tensions. Are current measures that are being announced sufficient to cushion the economic
00:25impact or is the real pressure still building beneath the surface? Joining me now is Distinguished
00:31Professor Datuk Dr. Raja Rasia who is the Executive Director of University of Malaysia's Asia Europe
00:38Institute. Prof, thank you so much for being on the show with me today. What's your read of the
00:43current situation in this prolonged high oil price environment? Where do you see the greatest risks
00:50for Malaysia's economy? I think one of the nice things is that unlike when it first happened,
01:00this is just a couple of days after the war started on the 28th of February. I think what we
01:08have is
01:08now this special arrangement that Iran has allowed for ships to bring oil. Remember that unlike what
01:17Malaysians have always had in mind that Malaysia is an oil exporter and therefore the only difference
01:23is that instead of the population facing market crisis, it's a subsidy that only reduces the profits
01:33of Petrona. That's a completely misconception because I think from about 2010, our supply of oil has fallen
01:44from 700,000 barrels to 350,000. And not only that an exhaustion taking place from that year onwards,
01:54especially so from 2018, but more so, our demand is gone up. In other words, about 50% of our
02:02oil, this is like
02:03three weeks ago, I think the Petrona's managing director himself, Azrul was mentioning that about 50% of our oil.
02:16I mean,
02:16this is all not gas. We are not exporters of gas, but not oil. We import something like 50%
02:24of our oil now to be processed.
02:27That's what goes around 95, around 97. And as well as the oil that we import for diesel. Although we,
02:37Peninsula Malaysia no longer had choice, the subsidy that was given to diesel. So what, the nice thing is
02:45that we have oil coming in rather than we having to depend on oil imported from other sources far away.
02:51Remember that our processing plants are more used to the sort of oil we mine here, which is sourish rather
02:58than the sweet oil
02:59that comes largely from certain parts of the world. Now, excuse me. So we have that path, except that oil
03:09prices are
03:09soared from about US $60 a barrel to something like $210 US dollars, almost twice, twice the price. So we
03:18are looking at the time of
03:201979, 1980, when oil prices went up two and a half times, as compared to 73 to 75, when it
03:27went up four times,
03:29the first oil crisis, the second oil crisis. So we are almost reaching the second oil crisis, inflation in oil.
03:35So that's the situation. And obviously it means that since we have our Budi 95, which obviously means that
03:44we are subsidizing Ron 95, particularly in Peninsula Malaysia because diesel is also subsidized in East Malaysia.
03:50Now, this actually means that our government having to pay now, not just transferring the profits of Petronas,
03:57but having to pay imports of that oil in order to process and use it. And then obviously the government
04:05is reduced from
04:06from the rating to have 300 litres to 200 litres now. My own feeling is these are things that the
04:16people have to bear.
04:17We have often taken lots of such things, an example B97, B98 financial crisis, when promotions were staggered,
04:27when increments were stopped because we faced the Asian financial crisis then. Now, I think these are things
04:35that the people should be able to bear, the reduction from 300 to 200 barrels. It's a question of how,
04:43instead of the price itself affecting consumer behaviour, we now have a way where we then come up with an
04:53austerity drive, knowing that these are things that we have to deal with. We do it now rather than later.
05:00Prof, I have to ask you though, the reduction of that monthly entitlement of Budi 95 from 300 to 200,
05:07it doesn't affect many people. It may affect some, but as the Prime Minister said, it doesn't affect 90%
05:13of the people who use Budi 95. Are you concerned that we're not doing enough to address the oncoming
05:23economic impact compared to other countries within the region who are doing far more to reduce energy
05:31consumption, announcing national measures and the like? Should we be doing more in Malaysia in terms
05:38of the government and its urgency to announce energy crisis measures?
05:45Prof, let's accept that as far as petrol is concerned for the peninsula of Malaysia, we are one of the
05:51cheapest prices around after the subsidy. We are one of the cheapest prices around and therefore we should be
05:57happy with it. Now, I also believe, let's look at it. In the first oil crisis, you had a situation
06:05where
06:06where the Prime Minister of Britain lost his premiership, Edward Heath. In the second oil crisis, James
06:13Kelligan lost his premiership to Margaret Thatcher. That's what inflation does. Now, we are preventing that.
06:19I'm not sure how long we'll be able to address that. But of course, given the surplus we've had,
06:25it after all, development is largely, we don't take care of the majority. If we don't take care of the
06:31poor, you don't call progress by itself as development. So I think in that sort of sense,
06:36I think we are in the right sort of approach in terms of addressing it, except that I think
06:43wastage should not be tolerated. Now, you raised this question whether 200 litres is enough. My own
06:49feeling is, I myself live very near India. I myself use less than that. But I buy around 97 because
06:56intentionally, I believe that these are consciously things you take care of if you believe in the
07:03environment, if you believe in fumanasan global, if you believe in overheating of global warming,
07:09what it does to the environment. I'm not Donald Trump. He doesn't believe in that. But right,
07:13that's a step. Nature has accepted that. And therefore, we should work towards that. In fact,
07:20even to prevent greenwashing, it's just it's a bit like our electricity, we have a situation where
07:27most of what we use is from coal, import largely imported coal, we produce electricity as well as gas.
07:34Now, these are not nice things, because after all, those two constitute fossil fuels. Now, we only use
07:40something like 20% green energy. And out of that, 18% of that comes from hydro. Now, if you
07:46remove that,
07:47even though we've had four large scale solar projects, four large scale solar projects,
07:53and several other things we've done, but from wind and solar energy, we only get 2%. Now, I think we
08:02should seriously work towards extending that, so that we end up our dependence on fossil fuels, not just
08:10because we want to see that we don't become import dependent on oil, but also we don't want to be
08:16a
08:17contributor to global warming.
08:19All right. Okay. So you mentioned a bit earlier, Prof, about inflation. So that could be one of the
08:25risks that we're keeping an eye out for with this crisis. How quickly do these types of price shocks
08:34typically transmit through an economy like Malaysia? I'm just wondering what tends to hit first, what
08:39tends to lag, and whether if oil prices remain elevated for a prolonged period for several months,
08:45even going into 2026, then how might that reshape household spending patterns, household
08:52consumption, domestic demand, and the like?
08:55Prof, yeah. I mean, oil is one of those notorious items, commodities, where it's in fact, not just
09:02real impact, but also perceived impact, expectations people build, can be disastrous. For me, Jimmy Carter
09:09was the great president of the US had, but he lost the elections because of the oil crisis, 1979. He
09:16lost
09:16to Ronald Reagan. Inflation plays a major role in terms of how people react with regards to voting.
09:22But again, it really also makes life difficult for them, not just the direct effect of buying oil
09:29at market prices. In our case, we have subsidized prices, but also the indirect effects of how it
09:35translates the spiraling effect of it on other prices. So we have a monthly inflation, normal inflation
09:42rate like something like 1.8%, rather low. But with that translating across, we're going to have
09:50disastrous inflation rates. And if it goes beyond a certain level, we are going to have a stipulation,
09:55both it causing unemployment, as well as it raising inflation. So both of which will create chaos in
10:04our economy. So I think this is an important thing to look at, and oil is indeed a major variable
10:11when it
10:11comes to the inflationary effects on how, not just how the government survived, but how people live.
10:19Now I think the government so far has been playing the role quite well in insulating its effects on
10:25their livelihoods. So Sakit, may I ask Prof what you're watching out for? I mean, how do we digest this
10:32moment? Even if the war ends today, tomorrow, that there will be a lingering effect on the global economy.
10:40I'm just wondering what you're watching out to assess whether or not the situation is stabilizing,
10:45deteriorating, and how it might impact Malaysia's economy specifically?
10:50I think Malaysia has had great ability to bite the bullet, to use Krugman's expression,
10:58during moments of crisis. I mean, imagine who would have expected us to come out the way we did
11:03with the COVID-19 pandemic. The immediate impact it had on flights, on tourism, and a whole range of
11:11other things. And in fact, we, many, only got one member of the family coming out and rarely coming
11:18out of the house because you have a situation of highly dangerous, volatile, infectious disease
11:25disease lurking out there that nobody can see. Now, we have come out of all this crisis suggesting that
11:31we should go with confidence. And fortunately, despite all the political rhetoric that we have,
11:38our governments are also concerned about our people and whatever they've done so far. So I think that part
11:44of it should be okay. But my own feeling is it should be an opportunity, taken as an opportunity,
11:51to make it much more impactful, what we do in terms of translating our dependence on fossil fuels.
11:57We should move towards renewable energy, much more so. And we have the capacity to do it. The
12:04question now is, are we going to move on to do it? I think we should.
12:08Thank you so much for speaking with me. That was Distinguished Professor Datuk Dr. Raja Rahsia from
12:13University Layers Asia Europe Institute, wrapping up this episode of Consider This. I'm Melissa Idris,
12:19signing off for the evening. Thank you so much for watching, and good night.
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