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Reliance on the Fossil Fuel Sector in Malaysia

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Malaysia has been heavily regarded as a fossil fuel economy due to its large reserves of natural gas and its bulk exports of this fuel to finance the country. As mentioned, the oil and gas industry contributes about a fifth of Malaysia’s GDP and makes up 76% of the energy sector, since Malaysia classifies as the 3rd largest liquefied gas exporter, exporting nearly 10% of the global supply (in 2017). Therefore, it is evident that Malaysia relies on oil and gas activities as a big source of income, and with this expected to increase due to its current financial situation. It is reported that PETRONAS has contributed around US$200 billion dollars in the past four decades. This can be seen in Figure 2 where Malaysia is the 2nd largest exporter of oil in South East Asia making the country dominant in the trading of LNG within that region, aside from Indonesia.

From a green economy perspective, this is dangerous as Malaysia is strongly relying on the export of a resource that is ultimately finite in supply. Additionally, this abundance of fuel in Malaysia has externalities, such as encouraging high fossil fuel use in the transportation sector. Aside from indirectly leading to higher CO2 emissions, this trade also damages aquatic ecosystems through oil spills. Just between 1976-1997, 55,000 tons of petroleum had been spilled into Malaysian seas. Not only is this physically and economically difficult to clean up, but the PAHs can result in developmental issues and increased vulnerability to diseases for wildlife. However, the level of activity relating to oil in Malaysia is expected to decrease. The gradual slumping of Malaysia’s oil and gas industry might encourage a development of alternatives for energy use. In terms of 2018 and onward, revenue from PETRONAS is expected to fall due to the trend of lower oil prices, since June 2014. PETRONAS is expected to produce 100,000 barrels less in the coming five years, predicted by the crude oil prices ranging from US$50-60 per barrel. Due to the decrease in the amount of oil being collected, costs are increased from the overcapacity of “assets such as fabricators and marine support vessels. ” As a result, PETRONAS’ spending on capital expenditure fell by 30%.

Therefore, this gives Malaysia incentives to push development into options such as forms of renewable energy in the long-run, a step towards a sustainable economy. This is due to the volatility of oil prices’ direct effect on the Malaysian Ringgit. When it drops, its fall in contribution to GDP would weaken the Malaysian economy to the point where there is “sustained devaluation” of its currency.

Although the government may currently have to increase its dependence on oil revenue, disassociating from the pressure of oil prices on the Malaysian economy will be pragmatic for stability in the long-run; which could lead to the maximisation of the potential of Malaysian renewable energy, and major reduction in environmental costs from oil-related activities.

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Reliance On The Fossil Fuel Sector In Malaysia. (2020, April 12). GradesFixer. Retrieved October 29, 2020, from https://gradesfixer.com/free-essay-examples/reliance-on-the-fossil-fuel-sector-in-malaysia/
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