The recent observations that Klang Valley and Malaysian taxis are the ‘worst in the world’, combined with the increased petrol price and increased attention towards public transportation have raised more and more awareness about the issues within the taxi industry.

Unfortunately, it seems that raising awareness about the issues has not accomplished much or led to much change in the past few years and as usual, the consumer seems to be at the losing end.

One major problem is that the taxi industry is over-centralised. The government has effectively placed a price ceiling on the taxi industry.

The typical problem with a price ceiling is that it can create a shortage of supply in the market, as the low price causes demand to exceed supply.

When a shortage occurs, two situations can follow - suppliers can reduce supply, or suppliers can charge additional fees in order to get to the market equilibrium, the point where supply and demand meet.

This is what we are facing today. The price ceiling and lack of effective bus services have created a shortage of taxi services. The lack of enforcement by the government is allowing the price ceiling to be ignored by taxi drivers and consumers.

In the taxi industry, suppliers (taxi drivers) are reducing supply by withdrawing their services and refusing to travel to certain areas. Or, taxi drivers are demanding additional fares or refusing to use the meter and charging flat fares, in order to get to the market equilibrium.

In the long term this undermines the efforts of the government and destabilises the industry.

We must consider that although the actions of taxi drivers may be in violation of taxi permits and government regulations, the actions are being accepted by the market. It is becoming clear that the equilibrium of the taxi market is moving in the direction of higher prices.

Suppliers and consumers are starting to agree that the meter fare is too low and understand that, while some taxi drivers are ‘overcharging’ they are facing higher costs and certainly not profiting very much.

The current solution to problems within the taxi industry appears to be this - keep the fares fixed at rates set a decade ago, while licensing more taxi drivers and increasing the amount of competition.

Another 3,000 taxis have been proposed for the Klang Valley to raise the number to 24,000. The reality is that these additional taxis will not resolve the issues that exist within the industry. They will only make things worse.

The era of cheap oil is over and the world of transportation is changing around us. The things that we are used like cheap travel and using private cars for short trips will become less and less affordable.

That is why we must stop blaming taxi drivers and stop blaming the government. Instead, consumers, suppliers and the government must come to a new understanding for these new and challenging times.