Malaysia petrol and diesel price hike to bite Singapore hard, worsening record inflation rate

This article belongs to the Singapore inflation watch story arc.

thestar.com.my :

The fuel price hike in Malaysia is going to bite Singaporeans soon, and hard. Prices of a range of goods are set to go up in the island as the cost of trucking them in rises, with fresh food topping the list. Importers said vegetables, eggs and live poultry from Malaysia will cost 10% to 30% more from as early as next week [9 Jun 2008]. The impact will not be limited to produce. Practically everything imported from Malaysia, including building materials, will also cost more soon. Bus tickets are going to be more expensive - coach companies are already talking about a 25% hike in fares.

The increases follow Malaysia's decision to trim subsidies for petrol and diesel and raise pump prices from Thursday [5 Jun 2008]. Overnight, that meant a 40% increase in petrol prices. The lorries carrying market produce run mainly on diesel, which saw the biggest jump in price, rising 63% to RM2.58 per litre. Wholesalers in Singapore are bracing for a big hit, and say they will have no choice but to pass on some of the increases to consumers. Singapore imported 177,117 tonnes of vegetables (46% of total imports), 61,304 tonnes of chicken (37%) and 60,751 tonnes of eggs (100%) from Malaysia last year.

- What should be more worrying than the Malaysian petrol price hike is the diesel price that was raised at the same time. The 40% petrol price hike is just an annoyance for the relatively smaller population of motorists who drive up north every now and then. But the diesel price will affect everyone as it will have a direct impact on many categories of food which are imported via trucks arriving from all parts of Malaysia each and every day. The Singapore CPI price inflation rate is already at 7.5% as of April 2008, a 26-year record high. With these new developments, the inflation rate is set to go even higher. There was talk in the media earlier of easing inflation in the second half. So much for that!

My brother-in-law who is Malaysian, told me that the government will be reviewing the petrol and diesel prices every month from now onward. That sounds to me like they will be monitoring and matching market movements closely. As crude oil prices move up, their petrol and diesel prices will then move up accordingly - full market pricing in all its wonder and glory. Hence, the Singapore CPI figure could easily hit 10% or higher as oil prices continue their upward climb, and mind you, that's only the official figures - actual street price increases will be much higher. Just wait and see.

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