03 March 2015

Price of Petrol March 2015

The price of RON95 is now RM1.95 and RON97 is now RM2.25. This price is cheaper than prices in October 2014, when the present pricing mechanism was imposed. The nice table you see above is from the Facebook page of Sinchew Daily newspaper. (Thanks, guys! I couldn't have done it better myself....)

It's a frequent complaint of Malaysians whenever the price of petrol goes up. "What! Oil now up to $xxxx (insert figure here) per barrel! Soon our petrol will go up again. Soon everything will go up again...." And it is an accepted fact of life -- petrol prices will go up every so often, causing everything to go up. Coffee, food, clothes, services, etc. Everything goes up with the petrol.

However, due to the current petrol war between Saudi and USA, excess oil production has driven oil prices down. Some articles say that it's to drive the USA out of the oil business. Reason? Saudi has lower breakeven point for each barrel produced (after the initial cost of drilling the oil well), compared to USA producers. Oil wells drilled in the Middle East have a longer production period (about 20 years) compared to "fracking" method used in the USA (1-2 years). Once the USA is out of the oil business, oil production will be back to normal -- controlled numbers, and priced comfortably high.

In the meantime, local producers have no reason to raise their prices, not with the price of petrol at these levels. However, a good number of them still do, due to "the GST Effect". These are the producers and traders who make a big show of it. "Oh, the GST is coming!" they cry. "Everything will go up!" But in fact, on paper, it shouldn't go up at all. After all, many of them are already paying tax, and GST merely replaces these taxes. I sincerely hope that prices won't go up, even after GST is implemented.

In the meantime, it's still a good time to fill your car up and take a slow drive along Peninsular Malaysia's East Coast. Have a nice view of the sea and relax.

11 January 2015

Should petrol pumps hang from the ceiling?

While I was browsing my Google Plus timeline, I came across this.

Apparently in Japan and Korea, petrol pumps hang from the ceiling. This solves the issue of parking your car just right so that the pump is located next to where you pump the petrol i.e. the fuel filler cap or petrol cap.

I once read from a book, car manufacturers make cars with their petrol caps on left and on the right so as to make sure that petrol stations won't have people queueing up for petrol pumps of a certain sort only. For example if all cars had their petrol caps on the left, drivers would want to park on the right of the fuel pump so as to fill up their car fuel tanks. Lefts and rights are all right as a solution when petrol pumps are located at chest level -- you need to pull them over to the petrol cap, and the closer the petrol cap is to the pump, the better.

However, if petrol pumps hang from the ceiling, the issue of which side is the "right side" would not even come up. Here are some pictures of pumps that hang from the ceiling, thanks to Google Images.








It does look like a good idea, we can consider adopting it to reduce some of the following problems:
  • mess at individual pump stations;
  • accidents caused by people ramming into petrol pumps accidentally;
  • pump cables being pulled too far when the petrol cap is on the wrong side; and
  • inconvenience of reparking when the petrol cap is on the wrong side.
Of course, I am aware that petrol pumps in Malaysia have mechanism for credit card payment, and the pumps in the photos don't seem to have that. Maybe we should study how they solve that problem in Japan.

07 December 2014

A visualization .... World's Biggest Oil Producing Countries Today

I found this visualization of the World's Biggest Oil Producing Countries over at Visualizing.org. Source

I thought that I'd share it on this blog. I realised that the original image was too big and wound up being downgraded after uploading. So I broke it up into several images and uploaded it. Anyway, here it is:

Overall summary of countries

Saudi Arabia and Russia

United States and Iran

China and Canada

Iraq and United Arab Emirates

Mexico and Kuwait

Brazil and Nigeria

Venezuela and Norway

Finally, Algeria.

02 December 2014

Malaysian Ringgit Affected by Falling Oil Prices

Dear Reader

Malaysia's stock exchange and ringgit currency recently took a beating due to falling oil prices.

According to the Star:
The plunge follows an Opec decision not to cut production despite a huge oversupply in global markets. ... it [price per barrel] could plunge all the way to US$32.40 per barrel.

Oil prices fell to their lowest in five years yesterday due to the production war between Opec and the American oil boom from shale oil producers.

In recent months, the United States has become a major producer of shale oil and gas – fuel that’s extracted from rock fragments – threatening the position of Saudi Arabia as the dominant oil-producing country.

In response to the threat, Opec, which is influenced by Saudi Arabia, has vowed to continue production of oil in a market where supply has outstripped demand.

This has led to a free fall in global oil prices that have declined by more than 40% since July this year.Source

Malaysia is a net exporter of oil, and oil is currently below USD70 per barrel. According to Channel News Asia:
Mr Divya Devesh, FX strategist in FICC Research at Standard Chartered Bank, said: "Malaysia happens to be a net oil exporter, so lower oil prices impact Malaysia trade and fiscal balance negatively. So as a result of that, we have seen a sharp move higher in (US) dollar-ringgit.

"Also what we have seen is some degree of correction in Malaysia equities, particularly the oil and gas sector that has been badly hit because of the slide in oil prices, and we are seeing some of that equity weakness seep into currency as well."

Down in Singapore, money changers are snapping up the Ringgit. Source The article quoted a Malaysian, Chew, who planned to remit more money home, and a Singaporean, Rosnah, who planned to stock up on Ringgit as she goes quite often to Johor Bahru (JB) for her shopping, etc.

The most interesting part of the article? Here it is:

Analysts have said that Malaysia, whose oil-related industries account for a third of the country’s revenue, is likely to be the Asian country which will be hit hardest by the sudden steep decline in oil prices.

24 November 2014

Removing Subsidies

Dear Reader

It's been more than 5 years since Mr. Paul Tan wrote his article "How Fuel Prices Are Calculated in Malaysia". Other blogs have also covered this issue. To recap, the oil automatic pricing mechanism (applied in Malaysia since 1983) was based on the following:
  1. Cost of Product - Based on Mean of Platts Singapore (MOPS)
  2. Alpha
    • petrol - 5 sen / liter
    • diesel - 4 sen / liter
  3. Operational Cost
    • Peninsular Malaysia - 9.54 sen / liter
    • Sabah - 8.98 sen / liter
    • Sarawak - 8.13 sen / liter
  4. Oil Company Margin
    • petrol - 5 sen / liter
    • diesel - 2.25 sen / liter
  5. Petrol Dealer Margin
    • petrol - 12.19 sen / liter
    • diesel - 7 sen / liter
  6. Sales Tax / Fuel Subsidy
    • petrol - 58.62 sen / liter
    • diesel - 19.64 sen / liter
    • subsidy if price higher than retail price
    • tax if price lower than retail price
As we can see, the subsidies are quite substantial compared with the alpha, the margins and the operational costs. PerakToday noted that MOPS is based on refined oil rather than crude oil; this causes MOPS to be higher than NYMEX.

Philippines and Indonesia have similar oil pricing mechanisms.

Removing fuel subsidies will help the economy, by freeing up resources that can be used for other purposes. Here are some slides from a presentation about "Fiscal policy related to fuel subsidy and climate change program in Indonesia."

Source: OECD

The move to partly eliminate fuel subsidies has been implemented recently in neighbouring Indonesia. Economists have known that fuel subsidies are wasteful, but politicians who do away with fuel subsidies will face the wrath of voters.

From the Economist, 22 November 2014:
Indonesia’s fuel subsidies are wasteful, expensive and poorly targeted—benefits overwhelmingly accrue to the country’s middle and upper classes, rather than the car-less poor. Between 2009 and 2013 Indonesia spent more on fuel subsidies (over 714 trillion rupiah) than it did on infrastructure and social-welfare programmes combined. Subsidies threatened to eat up more than 10% of total government spending next year, imperilling the country’s ability to pay for the ambitious and necessary health-care, education and infrastructure programmes that Jokowi promised in his election campaign. The price rise, modest though it may be, is forecast to save the government roughly 120 trillion rupiah next year.

From Fortune, 18 November 2014:
The move, which fulfils a key pledge of Widodo’s election, will raise domestic gasoline prices by around 31%, and diesel prices by 36%. ... it will handily reduce both the government’s budget deficit and, by reducing demand for imported fuel, the current account deficit, which have been the country’s two biggest macroeconomic weaknesses in recent years.

Widodo is following the lead set by Indian Prime Minister Narendra Modi in taking advantage of the sharp drop in global oil prices to eliminate subsidies that have swallowed up vast amounts of public money in recent years.

One funny thing is that in Indonesian websites the discussions about fuel subsidy frequently discuss "BBM". It stands for "Bahan Bakar Minyak". (Source)

Here are some pages from a brochure from Jabatan Penerangan Malaysia, on rationalization of fuel prices.


I hope that the subsidies recouped will be used to benefit all communities in Malaysia, irrespective of race, religion and region.