Malaysia – An engineer’s take on oil subsidies

Since oil subsidies have been a staple ingredient in the media, I thought I would list down some items of discussion with respect to either maintaining or dismantling the current subsidy structure:

  • Subsidies stifle efficiency: With low consumer energy prices, industry might not be willing to develop more efficient technologies that increase efficiency, as there is no financial incentive to do so. Examples of such technologies are inverters to smooth out the start-stop power requirement of equipment such as air conditioners, more efficient lighting technology.
  • Subsidies artificially increase commercial efficiency: If the viability of new manufacturing lines or engineering solutions have a energy cost component, then because energy is cheap, the return on investment would be higher than if energy was factored in at global prices.
  • Malaysian pays for neighbours’ gas: ‘Nuff said.

One Response to Malaysia – An engineer’s take on oil subsidies

  1. The Fartman says:

    A false sense of economical growth is brewing. Subsidies actually reduce competitiveness at global level, causing domestic companies failing miserably when the enter international trade.

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