What Will The Price Of Petrol Be?

I read with interest over the weekend that Future Fuels Forum, organised by CSIRO, has published a report stating that fuel prices (in Australia) could reach $8 per liter by 2018. When compared with Malaysians, Australians seem to be much more concerned about the price of their petrol. Why is that?

According to this article at the Sydney Morning Herald, the FFF report is based on the premise that (a) petrol production will peak; (b) petrol production will decline; and (c) demand for petrol will spiral upwards. All of this is based on the premise that we will reach Peak Oil in the next 5 years. Peak Oil is the point when we have reached the maximum production for petrol, and basically, there's no more petrol left to be pumped.

However, an article published by the Centre For Research on Globalization (Is There An Oil Shortage?, by I. Hossein-zadeh), denies that we have reached Peak Oil, and blames the soaring prices of oil on "the destabilizing wars and political turbulences in the Middle East."

Personally, I believe that the price of petrol will continue to escalate. I take the liberty of reproducing a table showing the prices of petrol (in the Malaysian market) since February 1998 to the present date. It shows that, the price of petrol has increased by a higher percentage with every increase.

	PETROL
	Price Hike	New Price	% change
Date	sen	RM/liter
Feb 1998		1.10
1 Oct 2000	10	1.20	9.1
1 Nov 2001	10	1.30	8.3
1 Mar 2003	5	1.35	3.8
1 May 2004	2	1.37	1.5
1 Oct 2004	5	1.42	3.6
1 Mar 2005	0	1.42	0.0
5 May 2005	10	1.52	7.0
31 Jul 2005	10	1.62	6.6
1 Mar 2006	30	1.92	18.5
5 Jun 2008	78	2.70	40.6

Acknowledgement: The table was adopted from the article, Deteriorating Consumer Confidence From Fuel and Tariff Hike by A. Dass, at pp. 16-17 of the July 2008 copy of Smart Investor (Malaysia Edition).

From this table, it becomes clear that the price of petrol has never gone down. In fact, the price of petrol has only increased; and the remarkable part is that in recent years, every increase has been greater than the last. Could this trend ever be reversed? It is certainly not logical to assume that it can ever be reversed.

Perhaps one of the reasons why petrol will continue to rise in price is the continual population boom and the neverending need of the young to plug into electrical appliances. In this respect, we may like to consider the theories of Thomas Malthus.

China, India, and Malaysia

Wikipedia keeps a list of oil prices around the world. The list is regularly updated.

OPEC chief, Chakib Khelil, was quoted in The Age (Australia) blaming the weak US dollar for the skyrocketing price of oil. He said the price increase was not linked to demand and supply. In the same interview, he also said that strong demand from China and India (for petrol) will foreseeably keep the price of petrol high.

I read that article and wondered what China and India did to require so much petrol. Here is a quote, incidentally also taken from The Age (Australia):

Until recently, several billion Chinese lived as we did a century ago. Imagine their energy demands rising to our levels and you'll quickly figure oil prices aren't going to return to the levels of a year ago.

Taken from this particular editorial, "The Year Everything Changed", the writer noted how the present oil crisis is different from the petrodollars oil crisis of the 1970's: First, oil crisis in the 1970's was artificial, because oil supply was artificially limited; second, it gets harder and harder to mine petrol because the mining sites are getting further and further outshore, in ever deeper waters, making it uneconomical to mine; and third, demand for petrol will continue to grow whereas there is only a finite amount of supply.

The writer certainly had a point. Again, I can do no better than to quote his words:

The real change being wrought on us is in energy. And it is energy - or rather the cost of energy - that will determine our future.

Imagine all the undernourished, poor and impoverished nations of this world, slowly inching their way toward economic emancipation. We are talking about billions of people, not including China and India. Imagine them striving to the lifestyle of the average Australian / American / Canadian: Fast cars, electricity available all hours of the day, et cetera. Surely, you can imagine these people would bump up the amount of energy demanded by, and consumed by, the world.

Malaysia is one such nation. By most calculations, we are a Third World nation. We have certainly not yet arrived at First World status. Our Malaysian government seems to be making a genuine effort to impress upon the rakyat the rising price of petrol. To what end? After all, our nation is a producer of petroleum. We produce more petrol than Singapore. How do we match against Singapore's strategic oil reserves of  "31.8 million barrels of crude oil and 64.5 million barrels of oil products"? Better still, has there been any effort channeled toward implementing carbon trading in Malaysia? A carbon trading market has been established in Melbourne. Whereas The Star (Malaysia) reports, the Malaysia Energy Centre estimates that Malaysia has up to 100 million tonnes of carbon credit.

Perhaps, with that last piece of information, it would not be fair to put Malaysia in the same basket as China and India.

The latest Oil Market Report, care of the International Energy Agency (IEA), expects global oil demand to grow by 1.1% in 2008. The IEA also records Malaysia (in 2005) as: producing 34,908 thousand tonnes of crude oil, importing 7,885 thousand tonnes of crude oil, and exporting 19,354 thousand tonnes of crude oil. With figures like that, I don't understand the Government's claims of "subsidy", when in actual fact we are consuming a portion of what we produce. Put another way, who did they say they are paying the subsidy to?

If you are interested in reading the IEA's Medium-Term Oil Market Report for 2006 and 2007, they are available as free downloads. Click on the following:

• 2006 Medium-Term Oil Market Report - link
• 2007 Medium-Term Oil Market Report - link

Welcome Post

The price of petrol in Malaysia today is RM2.70.
It has been so since the 5th of June, 2008.
References: Economic Times Channel News Asia Xinhua

The international price of petrol today is USD$135.21 per barrel.
Reference: OPEC price basket, based on petrol prices in 13 countries

One barrel of oil is approx. 159 liters.
Reference: Google Wikipedia

The international price of petrol is approx. USD$0.85 per liter.
(Calculated by dividing USD$135.21 by 159 liters.)

Therefore: the int'l price of petrol is approx. RM2.75 per liter.
Reference: Yahoo! Finance (Currency)

Welcome to PetrolMalaysia.com. You may be asking why I have set up this blog.

Petrol is a pressing concern, at the present moment, for all citizens of Malaysia. The rising price of petrol, continuing unabated and unchecked, will create problems for all Malaysians. The rising price of petrol will necessarily spill over into everything else -- services and goods -- which, in turn, will go up in price, too.

This blog has been set up in response to this dire situation. Over time, I hope to blog about matters related to petrol, oil, gas, diesel, etc., most likely in the context of Malaysia. If this blog is able to inform you and expand your horizons, all the better. Yet, perhaps, this blog has been set up for myself. I am, dear reader, at that stage of life where the whole of life stands still every time I think about the next ten years. I don't have a plan for the next ten years. Yet I have a strong urge to "make it", to "make something of myself", and most importantly, "make sense and meaning of life".

There is no doubt that the whole world is suffering as a result of petrol price increases. The price of oil has skyrocketed all over the world. Today, I read that truck drivers in India protested against the rising price of petrol. Today, I read that the price of petrol has touched USD1.68 per liter in Japan. Businesses are reeling as they struggle to maintain profitability. As a result, they have to pass on their costs to their customers.

The prices of consumer goods and services are rising everywhere. Airline companies are struggling to maintain profitability. The Malaysian government is cognizant of inflation hitting an all-time high. Bank Negara Malaysia (Malaysia's central bank) expects interest rates to rise in response.

How will we fare? Only time will tell. I do hope that if there are like-minded readers out there, you would drop me a line. I would be more than happy to connect with you. Also, if you have an opinion about petrol worth posting up (i.e. it makes good reading), I would like to publish it on this blog as well. (We could publish a short sypnosis and provide a link back to your page, if that's your cup of tea)

Til the next time.