24/10/2008 (The Star Online), Kuala Lumpur - Falling oil and commodity prices sound like good news for the consumers but to the Government, it means a shortfall of billions of ringgit in revenue.

Petroleum-based revenue account for 40% of the Government’s projected income and Second Finance Minister Tan Sri Nor Mohamed Yakcop said other streams of revenue must now be found to meet this shortfall.

The main headache for the Government is falling crude oil price, which dipped as low as US$67.40 per barrel yesterday in New York.

When the Government planned its budget for next year, it did so by calculating its revenue based on oil prices at US$125 per barrel.

On top of this, palm oil prices have fallen by as much as 65%. In March, palm oil was at RM4,486 per ton and yesterday, it was US$1,565.

Bernama reported Nor Mohamed as saying that the impact from falling petroleum price would only be felt in 2010 as government revenue should remain good next year because petroleum companies would pay the taxes based on their 2008 incomes, where on average the crude oil price remained at a reasonably high level.

“However, in 2010 it could become an issue if the crude oil price in 2009 were to stay at US$70 per barrel level as the companies will pay taxes and dividends based on a lower crude oil price,” he told reporters after launching Amanah Ikhtiar Malaysia Puchong branch’s urban area micro financing programme here yesterday.

He said the Government has to make sure there were other revenue sources but declined to reveal the other sources of income being looked into.

Petronas paid the Government a special dividend of RM6bil for the year ended March 31, bringing its total dividend for the period to RM30bil.

However, industry sources said even the 2009 revenue could be hit by the drastic fall of crude oil prices, which started in September.

“The high crude oil prices lasted for about four months and prices are expected to continue to fall for the rest of the year.

“Already, it is forecasted that actual demand for petroleum in the United States had fallen by one million barrel,” said a source.