17-19 August, 2008: Fire At Tanjung Langsat Port

At about 6.45pm, on the 17th of August 2008, a fire broke out at a 16,000 tonne gasoline tank located at the Tanjung Langsat Port in Johor. The tank was leased to Trafigura Pte Ltd, a Swiss company. The fire caused an inferno with billowing black smoke which was visible miles away. The police could not identify the cause of the fire but ruled out the possibility of sabotage.

On the following day, the fire worsened, spreading to an adjecent tank. At about 7.10pm on the 18th of August 2008, the adjecent tank, containing about 8,000 cubic metres of inflammable napthalene, ignited from overheating. The contents of six other nearby tanks, containing naptha, gasoline and methyl tertiary butyl ether, were relocated to contain the fire.

On the 19th of August, 2008, the fire department resorted to high pressured water pumps ("hydro subs") to draw water from the sea to cool the tanks. The fire at the first tank, containing unleaded gasoline, was being contained by using foam flooding techniques.

The fire was finally put out after 67 hours of fire-fighting efforts. There were no casualties and no fatalities recorded. At last count, the losses included 17.8 million litres of unleaded gasoline and 8 million litres of naphtalene.

Many people were involved in this operation:

• "At least 70 fire and rescue personnel in 11 fire engines from the Johor Baru, Johor Jaya, Pasir Gudang, and Kulai stations" - The Star report dated 18/8/2008
• "Some 244 firemen and 16 fire engines from Terengganu, Perak, Negri Sembilan, Pahang, Kedah and Johor" - The Star report dated 20/8/2008
• Johor police department
• Fifteen (15) personnel from Petronas, Malacca division - The Star report dated 20/8/2008
• Seri Alam OCPD Supt Mohd Roslan Zainuddin estimated "Around 500 personnel including 14 fire engines were involved in the operation" - The Star report dated 20/8/2008

Here are some other factoids about the incident:

• Bernama reports that the adjecent tank contained 11,200 cubic metres of napthalene - Bernama report dated 19/8/2008
• The flames at the adjecent tank (containing napthalene) were as high as 30 metres
• Police have reassured the public that the air is safe as it only contains hydrocarbon
• Napthalene is possibly carcinogenic

Why is there a discrepancy between the 11,200 cubic metres of napthalene (reported by Bernama) and 8,000 cubic metres of napthalene (reported by The Star)? A subsequent Bernama report on 20/8/2008 explains this possible discrepancy between the 11,200 cubic metres of napthalene (that it reported) and the 8,000 cubic metres of napthalene (that The Star reported). Seri Alam OCPD Roslan Zainuddin was reported saying, "Petrol tank two contained 11,200 cubic metres of naphtha and only 3,200 cubic metres of gasoline was transferred to petrol tank seven before the fire from petrol tank one spread." It would seem logical if the "3,200 cubic metres of gasoline" actually meant to refer to "3,200 cubic metres of napthalene". 11,200 minus 3,200 would leave us with 8,000.

References
(1) The Star Online, 16000 Tonne Gasoline Tank Ablaze, dated 18/8/2008
(2) The Star Online, Another Fuel Tank Goes Up In Flames by Meera Vijayan, dated 19/8/2008
(3) The Star Online, Seawater To Fight Inferno by Gladys Tay and Farek Zolkepli, dated 20/8/2008
(4) The Star Online, Fire At Tg. Langsat Port Put Out by Meera Vijayan, dated 20/8/2008
(5) Bernama Online, Oil Tank Fire: Police Say Air Is Safe dated 19/8/2008
(6) Bernama Online, Fire At Two Petrol Storage Tanks In Tg Langsat Put Out dated 20/8/2008

The Price Of Petrol Is Now RM2.55 per litre

The price of petrol has been reduced by 15 sen. To be exact, the Malaysian Government has, effective 23rd of August 2008, lowered the price of petrol by the following amounts:

• RON97 petrol is now RM2.55 per litre (15 sen reduction)
• RON92 petrol is now RM2.40 per litre (22 sen reduction)
• Diesel is now RM2.50 per litre (8 sen reduction)

The front page headliner from The Star newspaper on 23rd August 2008 entitled "15 Sen Down", quoted Prime Minister Datuk Seri Abdullah Ahmad Badawi saying that the move was to help ease the people's burden. On page 4 of the same newspaper, PM Abdullah Badawi is quoted saying that the implementation of the "floating" price mechanism was brought forward after Cabinet considered the drop in oil prices in recent weeks and the increased inflation rate in July. (Article headline in newspaper: "Cut Comes 10 Days Early". However, the online version is entitled "Government Decides To Bring Forward Floating Price Mechanism")

For this writer, there was a part of the report which caused a bit of concern:

“There is a possibility that the prices may go up so it would be a waste if we do not lower our prices now. This is to take advantage of the current lower global prices,” he (Prime Minister Abdullah Ahmad Badawi) said after opening a kenaf plant centre.

Channel News Asia, in a report "Malaysia Cuts Fuel Price By 6.5%" points out that the price reduction was announced just 3 days ahead of the Permatang Pauh by-election, in which opposition leader Anwar Ibrahim, will be contesting. Anwar has made it one of his campaign promises to reduce petrol prices substantially if he is elected and manages to become Prime Minister.

In another report by The Star, "Review Fuel Prices Every 15 Days, Suggests Ka Chuan", PKR adviser Anwar Ibrahim appeared to take credit for the reduction of the petrol prices. He said that his earlier efforts to lower the petrol prices had "paid off" when petrol prices were indeed reduced. Anwar Ibrahim was quoted saying that the people of Permatang Pauh should thank him. (For those who are interested, there was a televised debate between Anwar Ibrahim and Shabery Cheek, Malaysian Information Minister in July. Clips of the debate can be viewed at YouTube [click to view]. Caution though -- the debate was conducted in Malay.)

The New System Starts On September 1st, 2008.

An AFP report quotes Prime Minister Abdullah Badawi saying on 2nd August 2008 that Malaysia will, commencing September 2008, "introduce a new system linking domestic fuel prices to the global market, but will cap prices at their current levels". This is in keeping with the falling cost of petrol. Global petrol prices peaked at USD140 per barrel but have since fallen. (To be sure, OPEC records that the world price of petrol stood at USD140.73 on 3rd July 2008 and is presently USD114.64 per barrel as of 6th of August 2008. This figure is debateable because OPEC calculates the price of petrol based on a basket of prices. The AFP report, in fact, states that the prices of petrol hit a high of USD147/= in July 2008.)

To summarize, Prime Minister Abdullah Badawi stated:

1. Petrol prices would continue to be subsidised at the rate of RM0.30 per litre
2. The price of petrol would be fixed on the 1st day of each month based on the monthly average
3. This price would not exceed the present price of RM2.70 per litre
4. Petrol prices would reflect the global prices of petrol of the preceding month

Simple arithmetic will show that the price of petrol should be adjusted for its retail on Malaysian soil.

1. 1 barrel of oil is 159 litres
2. The price of USD114.64 per barrel translates to RM378.77 per barrel (USD1 = RM3.304)
3. RM378.77 per barrel translates to RM2.38 per litre of petrol.
4. If this amount was subsidised by RM0.30 per litre, it would translate to prices of RM2.08 per litre.

Is this necessarily a good thing? There have been mixed reactions to the announcement. Among some of the notable reactions:

1. Housing and Local Government Minister Datuk Seri Ong Ka Chuan, apparently approving, stated: "We cannot have a situation where petrol prices go up only and not go down" (Source: Fuel Prices Likely To Drop, The Star, 4th Aug. 08 )
2. Independent energy consultant Dr. Pola Singh opines that petrol prices should be maintained at RM2.70 per litre of petrol, because consumers had gotten used to it, and petrol prices may further increase. (Source: Mixed Reaction to Petrol Price Float, The Star, 5th August '08)
3. CIMB Research opined that "a fuel price reduction may lower the cost of doing business, with savings passed on to the masses". (Source: ibid.)
4. RAM Holdings Bhd group chief economist Dr Yeah Kim Leng stated that Malaysians would become more competitive and more efficient as they became sensitive to changes in global oil prices. He was of the opinion that the Government should have made at least one adjustment to the price of petrol last year. The impacts would have been more gradually felt. When the Government could no longer subsidise the price of  petrol, petrol prices jumped from RM1.92 per litre to RM2.70 per litre. (Source: Floating Oil Prices, The Star, 9th August 08.)
5. Aseambankers Malaysia Sdn. Bhd. chief economist Suhaimi Ilias is skeptical that the prices of goods and services will come down even if the price of petrol is reduced. (Source: ibid.)
6. Tan Teng Boo, CEO of iCapital group, opined that petrol prices would continue to increase in the long term as demand from developing nations was strong. (Source: Petrol Price May Stay High On Demand From Developing Nations, The Star, 6th August '08.)

In my humble opinion, we can only gauge the impact of the new floating price system after one or two months of its implementation. The main question is how will prices of goods and services be affected by the constantly changing price of petrol: Would prices rise one month and fall the next, in line with the changing price of petrol? Contracts for works and services are usually carried out over extended periods of time -- months, sometimes even years. Usually there needs to be some certainty in the price of the contract. However, to be fair, contracts for services and works need to insert a clause to provide for the changing prices of raw materials and operating costs. My simple opinion is that as long as the Government maintains a price ceiling (presently RM2.70 per litre) for the price of petrol, there should not be any need to increase the price of goods and services.