What is the impacts of rising petrol prices?

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Despite the expected rising cost of living expenses and the revise of BLR rate, government still decide to reduce petrol subsidies ,with the RON 95 petrol and diesel prices slated to increase by 20 sen per litre at the stroke of midnight.

In fact, a recent Bloomberg Gasoline survey of 60 countries, Malaysia was ranked highly in terms of cheapest places to buy gasoline, tying with Nigeria, with only Iran, UAE, Egypt, Kuwait, Saudi Arabia and Venezuela offering cheaper pump prices.  (The survey was done before the recent price hike, but even factoring it in doesn’t change the ranking all that much.)

Several economic sectors, such as agriculture, construction, manufacturing, and transportation, use oil to produce output. Hence, the oil price fluctuation can affect these sectors.

Agriculture

Numerous studies from different countries have reported that a surge in crude oil prices significantly affects economic growth. The agriculture sector is one of the economic sectors that is harmed by higher oil price, as this sector inevitably consumes oil to run activities in agriculture. Several types of machines, such as tractors and croppers, use oil as power generator in the production, for instance, in cropping and carrying products such as rubber, coco, fruits, vegetables, and other agriculture products. Therefore, an increase in oil price can cause farmers more expense.

Construction

Rising oil price also can influence the construction sector as it pushes up the costs of raw materials. Suppliers inevitably increase raw material prices for contractors to cover higher transportation costs. The higher prices also cause higher shipping costs In the construction sector, oil price increase causes the contractors to incur the higher costs of raw materials.

Manufacturing

The manufacturing sector is also affected, as an increase in oil inevitably increases production costs. The number of production has to be reduced, which increases product prices, and, consequently, decreases consumer demand. High oil price has affected the cost and quantity of raw materials purchased mainly for manufacturers, as oil price affects the shipping costs of raw materials purchased for production.

Transportation

The fluctuation in oil price also threatens the transportation sector. This sector is tremendously dependent on oil as commodity for the execution of activities for transportation. Oil consumption on transportation escalates, such that fare, as in public transport, has to be increased. The affected transportations include buses, railways, and other shipping transport means. In this situation, when the oil price increases, transportation costs are affected, thus reducing transport demand.

People's Living Costs

The rising of fuel price will directly cause direct impact to us on transportation cost. For example, if you consuming RM200 petrol per month , you may need to pay up additional 10%. Besides that, we got pay extra for our food and other expenses also. This is due to the chain effect of petrol price rising to various sector which caused inflation.

However there will be certain sector emerged to benefit from the petrol hike also like car manufactures.

Car manufacturers are increasingly looking to hybrid and fully electric vehicles as the key to the future even here in Malaysia, while some countries are already pushing for biofuels to reduce dependency on petrol and diesel. The European Union, in 2008, set a target for renewables to comprise 10 per cent of transport fuel by 2020, most of which would come from so-called first generation biofuels made from sugar, cereals and oilseeds. Some of the leading Hybrid cars is Malaysia is Honda Jazz and Toyota Prius.

Closer to home, Klang Valley’s ambitious MRT and LRT-extension projects, which are currently on-going, will hopefully help to encourage more people to opt for public transport to travel to work and back.

If the Land Public Transport Commission can get its act together and put into place a proper feeder bus network, and ensure and enforce bus lanes on major roads as well as improve public bus services outside the city, then the pain of increasing petrol prices will no longer matter.