It's all about saving US

Assalamualaikum warahmatullah wabarakatuh,

I was shocked after reading this article.

At a G8 meeting in Japan:

On Saturday, five key energy-consuming nations, the United States, China, Japan, India and South Korea, all called on oil producers to increase output to try to control the soaring prices.

US Energy Secretary Samuel Bodman said: "It's not good for producing nations to see the US struggling economically. They depend on us to be a significant engine in world economic activity."

Mr Bodman said the subsidies in China and India had helped drive demand and so increase prices. "We know demand is increasing because a lot of nations are still subsidising oil, which ought to stop," he said."

The US means that it is the subsidies that increase the oil price - so stop it! If you stop the subsidies, people will not buy a lot of oil so the price will decrease (is this possible?!). It also means that your countries will suffer inflation and we, US will benefit from your inflation! That's why Venezuela (the biggest enemy of US) has the lowest oil price at the home market.

However, India & China ain't gonna submit to US demand:

India insists there is no agreement to remove the subsidies altogether.

Its representative at the talks on Saturday said the country was not ready to move to a position where the market decided the price its citizens should pay for oil.

China also made clear it had no time frame for moving towards lower subsidies, saying they needed to consider carefully how removing them might affect the country's social and political stability.

Why Malaysia has to submit to US and save their economy? Because we have floated the Ringgit currency, if US is down, we will down too (Read here to understand the impact of floating the Ringgit). Either way we will down - decrease subsidy and increase inflation or increase subsidy and destroy our currency. But I doubt the second will be worse than the first option. Anyway, the government decided to go for the first one to save US first thinking that this will save Malaysia too. I sure hope the government decision will save the poorest groups of the country. This is such a gamble.

ALLAHU'alam.

Wassalam.