Answer to Question #136226 in Microeconomics for jia zhi

Question

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. 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.

a) Briefly explain the impact of subsidies of the gas market in Malaysia?

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

Answer 1

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