Microeconomics assignment urgently need

Question

Malaysia’s Gas Supply-demand Gap

The gap between supply and demand for gas in Malaysia is set to grow in 2013 when contracted production declines, according to Datuk Dr. Abdul Rahim Hashim, president of the international Gas Union (IGU).

He said that Malaysia is facing supply challenges due to the decreasing levels of localized gas production in Peninsular Malaysia as well as increasing rates of extraction. Commercially challenging reserves, which are smaller in size yet also scattered in terms of locations, are also contributing factor towards the supply challenges, along with a general increase in cost related to exploration and production activities.

Abdul Rahim noted that, like every other part of the world, local energy demand in Malaysia’s increasing along with growing population, economic expansion, individual prosperity and urbanization. He further added that the nation’s dynamic economic and social-political interests need balancing to ensure the security of gas supply.

Commenting on the heavy subsidies in Malaysia which has kept end-user gas prices in Malaysia the lowest in the Southeast Asia region, he said that the prolonged regulated pricing causes market imbalance and inefficiencies. The subsidies have been in place since the year 1997.

1. Briefly explain the impact of subsidies of the gas market in Malaysia?        

       

1. Discuss the factors that have driven the increasing domestic demand for gas.

Answer 1

Hi Ramshka,

1. Briefly explain the impact of subsidies of the gas market in Malaysia?
2. From the above paragraph we see that subsidies are keeping the price of gas low thus are causing market imbalances and inefficiencies. Subsidies will keep the end-user gas price low, thus more people will demand gas. Though more people are demanding gas, producers cannot keep up since there is localized production and increasing rates of extraction.       

       

1. Discuss the factors that have driven the increasing domestic demand for gas.
2. Growing population, economic expansion and individual prosperity along with subsidies have driven the increasing domestic demand for gas.