The Truth Behind Pakatan’s Petrol Subsidy Promise

Pakatan Rakyat has promised in its manifesto – and in the words of its de facto leader, Datuk Seri Anwar Ibrahim – to subsidise petrol for all Malaysians, should they win at GE13.
This cannot be done – a fact omitted from their manifesto.
Pakatan maintains that "the windfall from oil revenue should be shared with the people" and that this "windfall" is how they will finance subsidies for petrol (cutting the price by 40 sen per litre). This promise is not grounded in reality.
Malaysia is on the edge of becoming a net oil importer. We import almost as much oil as Petronas sells on world markets. According to the International Energy Agency, Malaysia will cross this line by 2017 latest.
This means that the "windfall" to be "shared with the people" is the profit Petronas receives from selling on world markets and to Malaysians. Pakatan is therefore promising to lower petrol prices using money that will no longer exist if they are able to enact the price cuts.
Worse, Pakatan is also promising to increase the share of royalties Petronas pays petrochemical-producing states (and Kelantan) from 5 per cent to 20 per cent, further reducing the "windfall" available to pay for lower petrol prices.
Another problem is present within the Pakatan proposal itself. To subsidise something is to promote it. If the government subsidises petrol use, the experience in every country across the globe – especially the Arab states, where petrol is kept cheap and plentiful for many reasons – is that its use will increase directly.
Malaysia has proven reserves of 5.8 billion barrels (proven reserves are the total amount of oil in a nation's territory that can be extracted from the ground with today's technology). Daily oil usage is over 550,000 barrels per day, a number that has increased rapidly for years. It is estimated that by the end of this year, Malaysia will consume nearly 600,000 barrels of oil per day.
Petronas is unable to keep up with demand by instantly extracting every drop of oil in the proven reserves, which is why Malaysia is so close to being a net oil importer. Even if Petronas were able to extract all of that oil and turn it to purely Malaysian use, the oil would run out in less than three decades.
Worse, because all of the "windfall" would be from sales to Malaysians, Malaysians would be financing their own petrol subsidies, and so Petronas would take losses from the sale of oil, starving the government of revenue, and starving state governments of any royalties.
This is the truth of the petrol subsidy promise. In order for the petrol subsidy to work, funds cannot come from oil "windfalls" alone. They must come from general funds.
Pakatan will either discard this promise once they form the government, or will starve vital services to pay for it. There is no other option. This promise suggests Pakatan cannot be trusted even on the promises they have made for years.