Mar 26, 2007

Retail prices of petrol and diesel remain although world crude oil prices have dropped

PM, So when can we enjoy cheaper petrol? Just tell us when.

KUALA LUMPUR, March 26 (Bernama) -- The government will maintain the retail prices of petrol and diesel for now although world crude oil prices have dropped.

Prime Minister Datuk Seri Abdullah Ahmad Badawi said that this was because world crude old prices had not really stabilised and remained unpredictable.

"In terms of subsidies shouldered by the government for petroleum products, the amount remained high at RM7.3 billion in 2006, not a big difference from the RM8.15 billion in 2005 although crude oil prices dropped in the last quarter of 2006.

"In fact, in the first two months of this year the subsidy amount had already exceeded RM0.5 billion," he said in his written reply to a question submitted by M. Kulasegaran (DAP-Ipoh Barat) at the Dewan Rakyat sitting here today.

Kulasegaran had asked why the retail prices had not been reduced although world crude prices had dropped and the national oil company Petronas having made huge profits when the prices were high.

On Petronas' profits, Abdullah, who is also Finance Minister, said that it was not disbursed directly to the people but more in the form of dividends, royalties and via the spending of tax revenue.

"The money obtained from Petronas is credited into the Consolidated Fund and used for operating and development expenditure for the benefit of the people through the annual budget," he said.

Being a business entity, he said that Petronas also used part of its profits for re-investment to generate more profits besides for its operating and management expenditure.

To another question by Datuk Baharum Mohamed (BN-Sekijang), the Prime Minister said that the retail prices of petrol, diesel and cooking gas (LPG) in the country were fixed by the government through its Automatic Pricing Mechanism..

He said that this was to ensure that the people could afford them and avoid inflationary pressures when prices shot up in the world market.

"To enable the prices to be fixed and controlled, the government gives tax exemptions and pays subsidies, whereby if the cost exceeds the fixed prices, the government bears the difference," he said.

The government, he said was also prepared to let market forces dictate the prices, but this would be approached carefully.

"This has to be treaded carefully as the people can be unnecessarily burdened by price fluctuations. If such a scenario happens the government will have to step in by resorting to tax exemptions and subsidies again to ensure the situation does not get out of hand," he added.

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