Tuesday, June 10, 2008

Oil Price Hike and Fair Income Distribution

Back to the issue of the week, oil price hike.

We shall accept that the oil price hike is largely external factor, that demand simply far exceed supply in the world. We just hope and pray that with this high price, it would spur research and development and change attitude of world citizens towards alternative forms of energy.

Nuclear, solar, hydro, coal and whatever. In fact I like the idea of nuclear energy to supply our energy needs. Look at Iran, they are working on it. Our competitiveness and our success in the future depends on our ability to secure cheap energy. In our case, we should look into solar, hydro and nuclear.

I accept the fact that we need to let the price of petrol and diesel to float to the world price. This is to reduce conspicuous consumption, even though we are a nation blessed with our own oil wells.

But our income from selling the 'Tapis light sweet crude oil' should be fairly distributed amongst our citizens, so that no one shall go hungry. So a portion of the nation income should be redistributed to the poor in our society. This is why I call for social welfare payment for the poor in my previous posting. The workers, those people with jobs, shall also be fairly compensated, hence minimum wage legislation, so that everyone shall be able to live with dignity.

I like Mufti Perlis latest posting touching on income distribution.


Yes absolutely true, that before the nation leadership call for the rakyat to 'ubah cara hidup' the Prime Minister, Raja-Raja and Menteri-Menteri must spend their wealth first and not wasting our nation's resources.

We should take example from the time of Khalifah Umar, that the Great Khalifah didnt introduce a law to control price of food, or any other life necessities. Not because the Great Khalifah Umar understand the concept of 'invisible hand' in economics, but because even during the time of Prophet Muhammad SAW there is no such thing as price control and state subsidy, be there petrol subsidy, or rice and sugar price control.

Its simply false economics, by having a law controlling price on certain food item like rice, chicken and meat, we are giving message to entrepreneurs and farmers not to invest in rice or chicken farming and production, its not profitable. So in the long term the price of rice would be high because of limited supply.

We have seen this is happening to the price of rice. Price of rice has always been controlled, that rice farming was not profitable in the past 30 years. Scores of rice farming lands left idle or converted to other uses like housing etc. Until such time that we dont produce enough rice to feed ourselves.

The same could be said with the petrol and diesel. True that we are oil producing nation. By keeping the price of petrol and diesel artificially low, we are 'gorging'ourselves, wasting to the point of nothing much left. It would be better if we sell petrol and diesel at market price, then redistribute the profit to the poor among us, that way we would only use what is necessary, nothing beyond necessity.

I am looking forward to the day when the Govt announce social welfare payment for the poor as a form of safety net and minimum wage legislation for the workers. I am looking forward for fair income distribution in the country.

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