Tuesday, November 11, 2008

Is Malaysia constructing a future without oil?

Politics and rhetorics aside, we have yet to hear from both sides of the divide on the planning our nation development without oil. Malaysia’s government depends on some 46 per cent of its revenues from petroleum taxes.

According to Straits Times, economists also raised concerns over the widening deficit for 2009.
Due to the extra spending needed to prop up the economy, the government deficit is being raised to 4.8 per cent of the gross domestic product, from 3.6 per cent previously.

The sharp drop in global crude oil prices is thus worrying, economists say. In recent years, the government depends on oil and gas dug up and sold by national oil company Petronas to funds its spending.

Malaysia has registered a budget deficit every year since 1998.
In other words, the government has been spending more that what it was earning in the last 10 years!

Mr Dzulkefly Ahmad, a lawmaker for the opposition Parti Islam SeMalaysia pointed out that the drop in crude oil prices could cause an RM18 billion shortfall in projected revenue.
Due to lower prices, the government could see an estimated loss to the tune of RM18 billion to RM25 billion instead of the RM8 billion predicted by Mr Najib, he claimed.

An interesting article below on the UAE endeavour to live without oil!

The Kempinski Emirates Palace, Abu Dhabi, is home to an exhibition showcasing the under-construction Saadiyat Island development. An exhibition that has been toured, among many, by one George W Bush.

The exhibition is bordered by a wall covered with facts and figures concerning the growth of the UAE. Hidden among this wall is a white board sporting a series of bar charts that may have raised the eyebrows of a keen-eyed Bush on his January visit to the capital.

As the chart states, in 1975, 21.2% of the UAE’s gross domestic product was generated by the service sector, while 67.7% came from the mining and oil industries. By 2005, the service sector accounted for 42.1%, while mining and oil accounted for just 32.8%.

Oil, as we know, cannot last forever. Both Abu Dhabi and Dubai have begun to demonstrate that it’s time to begin laying the groundwork within which their societies can operate without the financial benefits and guarantees that oil brings to the respective populations.
Abu Dhabi, through such developments as the Louvre and the Guggenheim, has begun to signal its intentions through a gradual shift towards cultural tourism, pursuing its responsibilities to provide its people with cultural amenities worthy of a capital city.

One hundred and twenty kms down the road lies Dubai. The city of man-made islands, super-tall skyscrapers and indoor ski slopes. The city in which you can bob through a shark tank on an inflatable ring is planning to diversify along a very different path.
But there is a fine line to tread between the opening up of a society to a world of globalised traditions, and remaining sensitive to regional traditions. Treading this line becomes even more perilous when the source of income that has been relied upon for generations threatens to run dry.

The peak oil question

In 1956 Marion Hubbert published his theory on the capacity of oil fields and natural gas reserves, correctly predicting that US oil production would peak between the late 1960s and early 1970s.
Hubbert’s predictions were based around a bell-shaped curve, which came to be known as the Hubbert Curve, and the peak as “peak oil.” By theorising that oil production would peak when known reserves were at their highest, Hubbert was able to track the approximate time frame for depletion.
Today, experts are in wide agreement that the point of global peak oil is upon us. In June, Thomas Pickens, BP Capital Management hedge fund chairman, said, “I do believe we have peaked out at 85 million barrels a day globally.”
With a little more urgency, a Financial Times report last year warned that the world would face an oil crisis “within the next five years.” With words such as “crisis” now making their way into the oil man’s vocabulary, just how long do Dubai and Abu Dhabi have left?
Measuring oil reserves is no exact science, and even proven reserves can only be estimated. The BP statistical review of world energy, published last June, estimated the UAE’s proven oil reserves to be 97.8 billion barrels.
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WTF said...

Malaysian leaders are not that far-sighted , enjoy now worry later is the attitude.

mustakim said...

dont worry, you are too pessimistic. by the time oil runs out , we malaysians will be like indians or pinoys, all over the world working our ass out.