Demand Resource And Fuel Subsidy On Petrol

Petroleum is crude petrol in its natural express which contains a variety of hydrocarbons, liquid organic and natural and other inorganic materials (Petroleum. co. uk, 2013). Malaysia is known to be an important designer of petroleum. It has the 23rd greatest crude petrol reserves in the globe. Among many olive oil companies found in Malaysia such as Caltex and Shell, Petronas is the only major engine oil company that is had by the government. In season 2008, Petronas contributed RM67. 6 billion to the government, that was also 44% of the government's income (Kok, 2009). This shows that the petroleum industry is a significant contributor to Malaysia's income.

The demand and offer of petroleum in Malaysia is inspired by various factors. Regarding demand of petroleum, one of the factors is quantity of cars bought from the country. Matching to data shown in Malaysian Automotive Connection, the total amount of cars sold in yr 2000 was 343, 173; while in time 2011, the number of sales increased to 600, 123 (Malaysian Automotive Association, 2008). According to the International Energy Reports, the consumption of petroleum (thousand barrels/day) in yr 2000 is 141. 677, whereas the usage in time 2010 increased to 208 (U. S. Energy Information Administration, 2013). This shows a primary relationship between the number of vehicles sold and the demand for petroleum. The upsurge in public transportation impacts the demand for petrol. When more people use public transfer, final number of vehicles used for transportation decreases, petrol intake also decreases. In addition, the sales of hybrid cars can effect the demand for petroleum. In 2012, sales of hybrid vehicles have risen from 8, 334 models to 15, 355 items (Star Motoring, 2013). As hybrid cars are less challenging in petrol consumption, the demand for petrol will reduce slightly. Finally, consumer's income impact the demand of petrol because the higher the income, the higher the petrol use because they are able to spend.

Cost of crude engine oil affects the resource for petroleum (Caltex, 2013). When cost of crude petrol increases, development cost increases, earnings gained by the manufacturers reduces, price becomes expensive and this will decrease the demand for petroleum just a bit. The government insurance policy affects the petroleum source. For example, the federal government entrusted the country's petroleum to a government managed company called Petronas through the Petroleum Development Act 1995 (KeTTHA, 2010). With all the establishment of Petronas, exploration and extraction of petroleum increases. Finally, the depletion of resources affects the way to obtain petroleum. Since yr 2000, crude petrol reserves have been depleting slowly but surely (Othman and Jafari, 2011, pg12). When which lack of resources, supply of petroleum lowers. Price of petrol will spike.

A subsidy is the sum of money given intended to help a particular industry or something reduce its price and to spawn the industry. A gas subsidy is the amount of money, which is the difference between the selling price of fuel and its cost price, paid by the federal government. By doing so, the government could ensure that gas comes at a decreased price which will reduce the burden bared by people (Sam, 2012). There are several advantages to gas subsidy. One of these is that petrol subsidy can decrease the economic burden inflicted upon the indegent. The poorer people who are also consumers can get petrol at a lesser price. Another gain is usually that the residents could enjoy good deal of petrol even though the international selling price for petrol has increased.

However, gas subsidy has its down sides as well. Fuel subsidy can in turn become a responsibility on the federal government budgets. If petrol subsidy occupies the major section of the budget pie, which means that the government would have fewer budgets to spend on other jobs that will profit the country. Examples of such projects include education and health. It also encourages over-consumption (Hickey, 2012). When price of petrol becomes low for an extended period of time, the people will haven't any incentive to practice moderation in eating petrol because they can get it cheaply. Furthermore, everyone from various financial ranking receive the great things about fuel subsidy. The issue is that this strategy is not economically successful because the abundant who could find the money for to utilize more petrol would gain more from the subsidy when compared with the poor who could only consume limited amount of petrol (Aris, 2012). Finally, long term fuel subsidy will only encourage the people to become overly dependent on artificially cheap petrol (Kok, 2012).

In conclusion, quantity of automobiles, sales in hybrid vehicles, public transportation and consumers' income impacts the demand of petroleum, whereas cost of crude petrol, government coverage and depleting resources impacts the way to obtain petroleum. Petrol subsidy has pros and cons as explained in the essay. As petroleum is an essential commodity to Malaysia, we should implement ways of conserve and save this natural source of information.

(799 words)

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