Role of Oil and Gas in Economic Development of Malaysia

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ECONOMIC is something many people do not understand adequately to make sense certain Government policies such as a national budget. As a result, this lack of understanding, and the lack of the initiative to seek an understanding, has led many citizens to conclude inappropriate and distorted polical inclinations. The former can be addressed via sharing of relevant knowledge but the latter is a Zombism disease that requires a lot more political strategy, if not left alone to worsen like a cancerous cell. At this juncture, I shall share relevant knowledge with the hope of putting some sense to fellow citizens who have not yet been severely infected by evil Zombism.

I have written many articles concerning the economics of Malaysia or the World (in the perspective of how it affects Malaysia). Sometimes there are others who write good stuff worthy of being viralled in the social media. Recently I came across a really good short and sweet article by Samirul Ariff of Malaysian Institute of Economic Research (MIER) on the subject matter Oil Revenue and its Trading Currency, US Dollars. I feel compelled to share this, and this is exactly what I am doing for this blog post as reproduced below:

ROLE OF OIL AND GAS IN ECONOMIC DEVELOPMENT OF MALAYSIA
By Samirul Ariff on 18 June 2016.

Oil & Gas plays a crucial role in the Malaysian economy, this commodity contributes to approximately 15% of export value and 30% to Federal Government’s revenue. Broadly speaking, there are two main categories, which are refined petroleum (downstream) & crude petroleum (upstream). A quarter of Oil & Gas exported is in crude form, the remainder refined. Malaysia is net exporter of crude petroleum, however she is a net importer of petroleum products.

Emerging markets begin to experience a situation of both declining commodity prices & exchange rates, since August 2014. In the case of Malaysia it is important to understand the structure of the market and structure of production to clearly understand how crude oil prices impacts the national economy.

Crude Oil is quoted in US Dollars as with other commodities, the implication being that some quarters allege that this benefits the United States, as its own currency (i.e., the US dollar) has become the de facto international reserve currency. One of the major obvious benefits is that the US would not face a balance of payments crisis, because it purchased imports in its own currency. This is referred to as “Exorbitant privilege”, the term was first coined in the 1960s by Valéry Giscard d'Estaing, then the French Minister of Finance who served under Charles de Gaulle.

A common question among those in geopolitics is when China’s GDP overtakes that of the US, will the US Dollar share the fate of the sterling and Britain's historic economic dominance. There was a time when Britain was the world's largest economic power and her currency the global reserve currency. Some, however, do not think the dollar is about to be vanquished as sterling was, rather, a “multipolar” system of international currencies may emerge. This inspired Barry Eichengreen who teaches at the University of California to write the book “Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System” in 2011.

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