Malaysian consumers mostly responding to price signals (quarterly MYR average prices, log annual and quarterly changes):
When the administered RON95 price was raised in 2013, there was little change in demand growth. It was still running at roughly 5% per annum. However, when the oil price drop in 2014 started feeding through into retail petrol prices, there was a steep rise in demand. A bit of an oddity, considering that the economic situation was less than ideal – or maybe it was because outbound tourism became more expensive, so people took to domestic travelling more.
In any case, the volume has lately become much more sensitive to prices (a signalling effect from monthly/weekly price volatility? worth keeping track of). For 1Q17, there was a sharp drop-off in purchases of petrol. From my point of view that’s ideal – a Pigovian tax on petrol (like tacking on GST) would then have the desired effect on consumer behaviour.
One thing the charts above don’t show however, is just how much petrol Malaysians are consuming. It’s sobering (index numbers; 2010=100):
Consumption of petrol is 70% higher than it was in 2010, and 2/3rds of the increase has come over the past three years alone.
Technical Notes:
- RON95 retail prices from Galvin Tan’s blog and press anouncements
- Retail fuel volume data from the Quarterly Distributive Trade Index reports from the Department of Statistics
Posts
What about the numbers of heavy vehicles, buses, cars and motorcycles increases.
ReplyDeleteAny numbers?
@jamil
DeleteHow's that relevant? You can only drive one car at a time, and adult population increase is less than 3% a year.
BTW, data for incremental increases are available here:
Deletehttp://www.maa.org.my/info_summary.htm
Total vehicles registered, though no breakdown:
Deletehttp://www.jpj.gov.my/pendaftaran-kenderaan-perdagangan
RON95 is still zero-rated vs RON97 being standard-rated. Would you suggest GST be imposed on RON95? Would that really force people to use the MRT/LRT/Grab more often?
ReplyDeleteC.H.
@C.H.
DeleteGST would be nice, but won't be nearly sufficient to cover the social cost of fossil fuel use. I'm thinking more along the lines of the old sales tax of 53 sen per litre, which is closer to my estimate of the cost.
That was a few years ago though, so should be more like 60-70 sen per litre by now.
@hishamh
DeleteI agree with accounting for the social cost of fossil fuels. Stopping short of a carbon tax, carbon credit?
But adding 60-70 sen to what is already the market price would be quite steep (~30% at current price). I can still recall back when Pak Lah sparked demonstrations by hiking RON95 to RM2.70 - and that was then. Could it still be done?
C.H.
@CH
DeleteWould a carbon credit market be doable for private car owners? I haven't really examined the possibility, since carbon credits are typically used for corporations.
As for the expected cost offset, it can be done in stages. The important thing is the principle of it, not the cost itself.
I have a hunch that it might be also because of the increased availability of public transport (LRT extension, MRT, feeder buses) and ride sharing service (the ones where you share a ride with other people in Grab or Uber). More people taking the trains and less cars on the road.
ReplyDelete@ho
DeleteYes, I hadn't considered that. Might be the case, though LRT extension happened much earlier, and the SBK MRT line wasn't fully operational until July this year. Ride sharing is also a possibility, though I'm doubtful about that. Wouldn't ride sharing cannibalise trips that would've taken place otherwise?