The economics of oil – Tay Tian Yan

Really? You couldn’t see this?

The Malaysian Insider, 2014-12-04:

Many people were confused: isn’t it great that petrol prices are lower now? The government can subsidise less and our budgetary deficit could be narrowed.

People no longer need to worry about the additional financial burden as prices of goods are expected to come down and the impact of GST tamed.

This should have been a piece of wonderful news in any way, but why did the equity and money markets slide? As if that is not enough, experts said the country’s economic prospects were gloomy.
The answer couldn’t have been more straightforward: Malaysia is an oil-producing country with oil revenue making up about 30% of the government’s budget. Although the government will have less of fuel subsidy to worry about, the saving would not be enough to offset the drastic loss in revenue.


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