The Economics Behind the Fuel Limit

At first I thought I wouldn't write anything until after Raya. However, I'm quite surprised by the bold measure taken by the government regarding the limit to the amount of fuel a foreigner can buy (see Brudirect).

Basically the government is giving a ration to foreigners. The effect of a ration is equivalent to the effect of reducing the price, however with the objective of restricting demand. So, for those of you who are familiar with the Demand and Supply curves, when the price is set below the equilibrium price, there will be an excess demand i.e. the quantity demanded will be greater than the quantity supplied.

The reason why the government is doing this is simply because the government has incurred (I presume) a large amount of losses. In case, many of you do not know, the fuel prices in Brunei are probably among the cheapest in the world. Also, year in year out, the prices you pay stay the same. (For example, here in the UK, the fuel prices are about 95pence p/litre for petrol and 97 pence p/litre for diesel, that's like $3.00 per litre! and the prices we pay vary each day). Why? Well, it is not because we are producing oil (those are crude oil and they aren't the fuel!), it's mainly because the government has subsidized the prices we pay. How much? I don't know, but I believe it's LOTS. Even if the amount of the subsidy is not much (highly unlikely), the government has also made losses in terms of the potential income it can get from selling the fuel, through the various taxes it can impose. (About 70% of the fuel price we pay in the UK are taxes).

Therefore, it is not really fair for the Brunei government to also subsidize the foreigners, many of whom unfortunately have abused our kind system (For e.g. having hidden tanks in their cars for the sole purpose of re-selling the fuel back in their home countries at higher prices - I think the fuel price in Malaysia is fixed at about RM1.90 per litre s so any price below this would be good enough). I don't also buy their excuse that the limited fuel is not enough for them to travel back and forth. Hey! Don't they have have fuel stations across the borders?

The downside of this policy however (as is always the case when there is excess demand) is the emerging of a black market. This time, I'm afraid it will be our own Bruneians who will be abusing the system, taking the advantage of selling fuel at higher price to foreigners. I hope, there is a readily preventive policy and its implementation for such occurrence. If however that happens, I will be more ashamed to call them our Bruneians.

Once again, we all should be grateful with what our government has provided us. Don't abuse this generosity. It may not last forever.

Salaam.

PS. We might also see a reduction in the number of 'tourists' coming to Brunei. This perhaps will give the true number of genuine tourists. And I would also love to hear other views especially those against this policy.