I do not support commodity price subsidy. Full stop. Subsidy on the price of an essential item, be it rice, sugar, water or petrol and diesel will only skew the consumption behaviour of consumers. Consumers tend to consume more of the subsidised item, which has been made relatively cheaper that other alternatives. This makes alternative products uneconomical as they are unable to compete based on price.

True, petrol and diesel are the basic necessities for downstream products. Anything that requires transport from the producer to consumer more than likely has the petrol component included in its final price offered to consumers.

So the theory goes that by subsidising petrol and diesel, other goods and services will not increase in price. How true. But that stance doesn’t encourage consumers, ie. the Malaysian people, to search for alternatives. By alternatives, I do not mean just biodiesel.

What if we change the way we do things? Do we have to commute everyday to offices, factories and drive our car to supermarkets to buy food? Do we have to drive our kids to school every morning? What if we collectively find other ways to reduce petrol consumption? Its price is the big determinant that will push us to change our way of doing things.

The poor villagers on bicycles do not have much use for the petrol subsidy as the city dweller in Taman Tun Dr Ismail in KL who has four cars in the porch.

Let us consider this scenario, let’s say the government tomorrow removes the subsidy on petrol and diesel. So prices rise to the world market price of about RM2.60 a liter for petrol. So a raft of other products and services would also increase in price such as food prices, bus fares and transportation costs.

People would then change their way of doing things. And firms would also change their way of doing business. I would expect people would make less shopping trips besides reducing their commuting. Firms would do more of their business online, and their office workers would do most of their work online from home, reducing the need to commute to office.

In my opinion, we have to move on and accept the fact that oil prices will stay high up for the foreseeable future. Let’s accommodate that into our planning for the country. The sooner we accept that the better.

Now, what will the government do with the billions of extra oil revenue? Surely, you can’t just use it to buy another Scorpene submarine or two? That will be the time for the government to announce that it will subsidise poor Malaysians earning below a certain amount to relieve them of their burden.

Najib Razak, do announce that the government will give RM200 a month to lower income Malaysian households, on a per household basis provided that the combined income is less than RM1,500 a month. For those with household incomes higher than RM1,500, the subsidy should be on graduated basis with no subsidy for households earning over RM3,000.