Asian governments on Thursday moved to cut energy subsidies to protect their finances and those of state-owned energy companies in the face of soaring oil prices.
As crude oil pushed through $135 a barrel for the first time, Taiwan, Malaysia and Indonesia announced plans for urgent action to free prices or cut subsidy costs. China denied rumours of an imminent increase in retail prices, but may relax price controls.
“It is probably more affordable for a country like China to subsidise than Indonesia,” said Peter Gastreich, oil and gas analyst at UBS in Hong Kong. “But if oil prices keep going up, it is simply not in any country’s best interest to keep subsidising these prices indefinitely.”
In Taiwan, the first act of the newly elected administration of President Ma Ying-jeou was to abolish price controls on petrol and diesel from June 1. The new government also said it would raise electricity prices in July.
Malaysia said it would soon announce a new petroleum subsidy scheme to keep its fuel subsidy bill at around last year’s level of M$40bn ($12.5bn) in spite of rising oil prices. With oil at $130 a barrel, the bill would reach M$48bn in the current fiscal year, exceeding the M$40bn that the government plans to spend on infrastructure and other development projects.
Nor Mohamed Yakcop, Malaysia’s second finance minister, also suggested that the government would take the unpopular step of raising electricity tariffs. “If there is a rise in the price of [natural] gas, we will have to pass that along, since we are not going to see Tenaga [the state power monopoly] lose money,” he said.
The Indonesian government said it would “soon” go ahead with a plan to raise fuel prices by an average of 28.7 per cent.
The recent surge in the price of oil has been particularly painful for Asian oil importers such as India, where imports cover 73 per cent of petroleum needs.
But it has also deprived state energy companies of additional revenues to make bigger investments in exploration, as well as downstream infrastructure.
India’s largest state-controlled pump operator, Indian Oil Company, is seeking shareholders’ approval to double its borrowing limit and help alleviate a cash crunch caused by price controls.
Analysts warned that planned cuts in subsidies and controls would have to be followed by more substantial energy market deregulation.
The Chinese government said that stock market rumours of an imminent increase in domestic fuel prices were “groundless”.
However, analysts forecast that Beijing would eventually endorse subsidy cuts.
_________________ "Mit der Dummheit kaempfen Goetter selbst vergebens" -Friedrich von Schiller
Joined: Mar 25, 2008 Posts: 713 Location: Alif Lam Mim
Posted: Thu May 22, 2008 2:37 pm Post subject: Re: Asian Governments to cut Subsidies
Quote:
In Taiwan, the first act of the newly elected administration of President Ma Ying-jeou was to abolish price controls on petrol and diesel from June 1. The new government also said it would raise electricity prices in July.
Wow. He was elected with promising an abolishing of price controls of fuel. We're trying to lower our prices in US national politics and the Taiwanese are open to increasing them (to their 'natural' levels). Good job? _________________ Riches are not from abundance of worldly goods, but from a contented mind.
Posted: Thu May 22, 2008 3:22 pm Post subject: Re: Asian Governments to cut Subsidies
I think they still have a long way to go in Indo and Malaysia to bring their subsidized prices up to global levels. In Malaysia it's been about 50 cents/litre and Indo around 70 cents/litre compared to say $1.25/litre in Canada.
Joined: Sep 25, 2004 Posts: 4543 Location: Boston, MA
Posted: Thu May 22, 2008 3:53 pm Post subject: Re: Asian Governments to cut Subsidies
You've got to look at Taiwan on a map.
Does a small island nation next door to its mortal enemy want to be dependent on foreigners for its energy?
Cutting subsidies is generally a good idea, especially when the subsidy is encouraging people to be wasteful. _________________ "www.peakoil.com is the Myspace of the Apocalypse."
Posted: Sun Jun 22, 2008 7:19 pm Post subject: Re: Asian Governments to cut Subsidies
In china cutting subsidies I read will mostly apply to gas bought at gas stations (think of it as window dressing) to try an appease politicians around the world (who have no idea about the big picture, or are too afraid to tell their own citizens that in fact they are part of the problem of ever increasing expectations).
Basically only 4% or so of the population in china has a private car, and those individuals will be the ones facing higher gas prices at the local gas station.
Demand for fuel will be somewhat be cut in those areas, but since china is central command economy with lots of government owned enterprises in the trasportation sector like rail ways, bus lines and airlines, the analysis I read is fuel subsidies in those sectors will not be cut so I don't expect the price of oil to go down anytime soon because the demand of people in china, india as well as the rest of the world is for a mobile life style just like people in the USA has had since the 1920's....
Asian governments on Thursday moved to cut energy subsidies to protect their finances and those of state-owned energy companies in the face of soaring oil prices.
As crude oil pushed through $135 a barrel for the first time, Taiwan, Malaysia and Indonesia announced plans for urgent action to free prices or cut subsidy costs. China denied rumours of an imminent increase in retail prices, but may relax price controls.
“It is probably more affordable for a country like China to subsidise than Indonesia,” said Peter Gastreich, oil and gas analyst at UBS in Hong Kong. “But if oil prices keep going up, it is simply not in any country’s best interest to keep subsidising these prices indefinitely.”
In Taiwan, the first act of the newly elected administration of President Ma Ying-jeou was to abolish price controls on petrol and diesel from June 1. The new government also said it would raise electricity prices in July.
Malaysia said it would soon announce a new petroleum subsidy scheme to keep its fuel subsidy bill at around last year’s level of M$40bn ($12.5bn) in spite of rising oil prices. With oil at $130 a barrel, the bill would reach M$48bn in the current fiscal year, exceeding the M$40bn that the government plans to spend on infrastructure and other development projects.
Nor Mohamed Yakcop, Malaysia’s second finance minister, also suggested that the government would take the unpopular step of raising electricity tariffs. “If there is a rise in the price of [natural] gas, we will have to pass that along, since we are not going to see Tenaga [the state power monopoly] lose money,” he said.
The Indonesian government said it would “soon” go ahead with a plan to raise fuel prices by an average of 28.7 per cent.
The recent surge in the price of oil has been particularly painful for Asian oil importers such as India, where imports cover 73 per cent of petroleum needs.
But it has also deprived state energy companies of additional revenues to make bigger investments in exploration, as well as downstream infrastructure.
India’s largest state-controlled pump operator, Indian Oil Company, is seeking shareholders’ approval to double its borrowing limit and help alleviate a cash crunch caused by price controls.
Analysts warned that planned cuts in subsidies and controls would have to be followed by more substantial energy market deregulation.
The Chinese government said that stock market rumours of an imminent increase in domestic fuel prices were “groundless”.
However, analysts forecast that Beijing would eventually endorse subsidy cuts.
_________________ "I'm 100% sure that unsustainable conspicuous consumption of natural basic resources will eventually lead to a proverbial hell on earth for those people who get stuck with the mismanagement mess of mankind not being stewards of the environment!"
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