Based on http://www.themalaysianinsider.com/malaysia/article/minister-ron95-petrol-subsidy-up-10-sen-pump-price-unchanged, petrol is one of the most important resource that is being used by various users for example motor vehicle users. petrol is a limited resource that is not renewable unlike other resource such as solar energy and etc. there are few company that sell petrol in Malaysia market, for example Petronas, Esso,Petron , and Shell. There is a few exploitation in Malaysia which is Labuan ,Sabah,Alor Star, Johor and so on. There is a few method of petrol extraction , such as open-pit mining , and drilling mining. From 1998 to 2008, the quantity demanded of petrol had increased for about 200%.That is a big number and it had made a huge profit to our country. The increase in quantity demand for petrol is due to increase in quality of living and they are willing to spend money on items such as cars and electrical appliances for self satisfaction. Malaysia is one of the main petrol suppliers in Asia area, whereas the customers are Thailand, Singapore, Vietnam and others.
Firstly, I will explain about the supply curve .From the law of supply, it is mentioned that as the price of a good increases, suppliers will attempt to maximize profits by increasing the quantity of the product sold. An example of the Law of Supply is as the price of good increases, suppliers will want to supply more of it. However, as the price of a good decreases, suppliers will not want to supply as much of it because they don’t get the good benefit in that.(www.investopedia.com)Supply of conventional petrol is inelastic as shown in the above graph for a few reason. The actual cost of pumping a marginal barrel of petrol is relatively low, once the capital expenses of prospecting and building an petrol rig (and associated infrastructure) has been put in place. The above graph is show about the relationship between the subsidy and supply. If supplier which have get the subsidy from government then they will be increased due to they can get more of benefit from the petrol. If supplier dint get the subsidy from government, their cost will be higher so the benefit they get will be decreased. According to the Malaysian insider, Malaysia government will give the citizen some subsidy is about per litre is now RM1.03, so RON95’s pump price presently is RM1.90 per litre. Therefore , the supply will from s2 switch to s1.
Secondly, I will explain about the relationship between the price of petrol and the quantity demanded of petrol .From the law of demand it is mentioned that while other factors remained unchanged ,the higher the price of a good , the smaller the quantity demanded; whereas the lower the price of a good ,the larger is the quantity demanded. For instance, when price of brand A pencil increase then the quantity demanded of brand A pencil will be decreased. In the Malaysia ,government will have some subsidy of petrol to help the citizen ,so citizen of Malaysia still can afford to pump the petrol and don’t need to stress about spend the money for petrol. From Dec 2010 ,the price of petrol is increased from Rm1.85 per little to Rm1.95 per little .From 2010 to 2012 , the quantity demanded of petrol have not any decrease, on the contrary increase more than previous times due to population will be increased every year.
In long term,the quantity demanded for petrol will be increased .This is because the population will be increased by every year also. The price of petrol will be increased due to the petrol is limited resource. If which of the day the petrol is finished ,then we hard to find it already. Limited resource is big different with the renewal resources, because the limited resource need to spend up to million year to produce it . So, the price will be increased when the big supplier want it because they also want to protect the benefit by themselves.
Petrol is a neccesity nowadays in the world which is an unavoidable need to keep things going.Therefore, even the price of petrol gets higher ,the quantity demanded for petrol will still be same.Eventhough there is technology that uses other resource to convert into energy to replace petrol ,for example the solar energy used in some of the car, but it is not common in Malaysia yet . so, the demand for petrol will be constant due to less choices for the resources that can be used to replace petrol. So citizen of Malaysia still must use petrol in their life. Beside that , the government should find other resources can replace the petrol , it will be renewal resources, such as wind system, solar system , water system and others. If not the price will be increased until citizen cant afford to pump the petrol and it may be affect the demand of car supply , so government had better find out the renewal resources ,because it can recycle and reuse.
In normally way , the price of petrol will be increased then the quantity demanded of petrol will be decreased from the law of demand. But , the petrol is a limited resource and people who have a car then they will use it so the quantity demanded will hard to decrease This is because one of the family in Malaysia atleast have a car so they must use it .That why the petrol is a necessity for people .The supplier of petrol can get more benefit in petrol because the petrol is limited resource, so the price can be adjust by government when they want to earn more because the price of petrol is fixed in a country . If not the system of the petrol will be confused for every buyer. In my opinion ,government must faster to find other resource to replace petrol, such as solar energy ,gas and others because one day the petrol will be gone. This is because its can reduce commitment for every motor vehicle users.I think this is the best way for settle the limited petrol and limited oilfield. Let the petrol not only resource fuel for the motor vehicle and help the poor family to reduce their commitment.