dateline 2014-06-02, Bloomberg:
dateline 2014-06-02, Bloomberg:
Malaysia’s huge fuel subsidy bill, estimated at RM20 billion last year, is overdue for an overhaul. While reforms are imminent, few expect any of it can happen until the general election (GE) is over.
An indication of how far off we are from real market prices is plainly seen at the pumps.
Last week, the price of the market-driven RON97 petrol blend was increased by 10 sen to RM2.90 a litre. The more widely-used RON95 blend and diesel selling prices were kept at RM1.90 a litre.
It was estimated that the cost of petrol is at least RM2.80 a litre based on the crude oil price of US$120 a barrel.
The government’s subsidy burden for RON95 petrol rose by 10 sen per litre this month due to increasing global oil prices said Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob today to the Star.
He said that the total subsidy per litre is now RM1.03. RON95’s pump price presently is RM1.90 per litre.
Ismail Sabri said the government does not want people to bear the burden.
Last December RON95 pump price was raised 5 sen.
Late last month, Prime Minister Datuk Seri Najib Razak assured Malaysians that RON95’s — which is used by most motorists — present price would be sustained regardless of global oil prices.
Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said here on Thursday that fuel prices would not be raised despite the escalating global oil price.He stressed that the current situation could still be handled without increasing the price of RON95 and diesel in Malaysia, which is now at RM1.90 and RM1.80 per liter.
Meanwhile, the ministry would discuss with the Finance Ministry to work out alternative measures to cushion the increase including increasing government spending on oil subsidy, he said.
You can subscribe to an online version of the paper at the e-browse site.
Anyone else know about this?
Malaysian petrol dealers said on Monday they will raise the price of the premium grade RON 97 fuel by 5 sen or 2.4 percent to 2.15 ringgit ($0.695) a litre on Tuesday.
“RON 97 has not been subsidised by the government and since world oil prices have gone up, the petrol price gets adjusted,” Hashim Othman, president of the Petroleum Dealers Association of Malaysia, told Reuters.
Do I need to elaborate on this article from The Star deadline 2010-01-08? It should be retitled ‘Fuel Pricing Finally Goes Bananas’:
PETALING JAYA: The bigger your car, the more you will have to pay for petrol from May 1.
This is because the Government is going to change the way fuel is subsidised.
It is planning for a fuel pricing mechanism that will ensure only targeted groups, particularly those from the lower-income, will receive fuel subsidy.
Also, foreigners who drive into the country to fill up their tanks will not be eligible for subsidy and will have to pay more for fuel.
“The bigger the engine, the higher petrol will cost,” Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said yesterday.
Don’t get me wrong, I’m all eliminating the fuel subsidy in conjunction with a concerted effort to entice me to use a safe, reliable, efficient, cost effective, redundent public transport system. My dark sense of humor was so tickled by the above article that it shut down for a few minutes for want to address all the things that can go screwy.
From the Star, dateline 2009-10-23:
Crude oil prices up 15% since start of October
PETALING JAYA: Rising crude oil prices in the international market may up the pressure on the Government to review local pump prices to rein in the country’s huge fuel subsidy bill.
Crude oil yesterday retreated from a high of US$82 per barrel hit in New York overnight, but remained above the US$80 mark during Asian trading hours yesterday.
At the current level, crude oil had surged 15% since the start of October and more than doubled from a low of US$34 per barrel in March.
And just in time for the next general elections.
Taken from the Star, dateline 2009-03:
PETALING JAYA: RON95 was the buzz at neighbourhood petrol stations as consumers had to quickly grasp the differences between the RON92 (which is discontinued) and RON97 (which has been upgraded) and the new, more environment friendly oil.
The first thing they want to know is how they will benefit from this change to RON95 which retails at RM1.80 per litre.
“About 90% of motorists using RON97 (which has been upgraded to a premium product and sold at a higher price of RM2.05 per lire) can now switch to RON95,” said Domestic Trade, Cooperative and Consumer Affairs Ministry secretary-general Datuk Zain Mohd Dom.
“The price of RM1.80 for RON95 will be capped at this level for the rest of the year,’’ Zain told StarBiz, referring to a statement earlier by Minister Datuk Seri Ismail Sabri Yaakob. “It moves within an active price range, depending on the price trend of oil gauged over a one-month period.”
Date line 2009-02-20:
PUTRAJAYA: The price of RON97 petrol will be increased, when the Government introduces RON95 to replace RON92 in July, said Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad.
He said this was to encourage consumers to use RON95, which was cheaper compared to RON97.
“The Government intends to subsidise more on RON95, when it is introduced in July to make it the same price as RON92,” he told a press conference here on Friday.
He said the price of both RON95 and RON97 petrol would be announced in July.
Don’t know about you, but I would have kept RON95 at the current price, and got RON97 users to pay a premium. If most cars can use RON95, then from the user’s end nothing has been changed, but the government can reduce its fuel subsidies.
From the crude oil price perspective, this will cause … no change at all.
BTW, the price of gasoline in the US (2009-02-16), according to my calculation method, is Rm1.85/liter.
Domestic Trade and Consumer Affairs Ministry Domestic Trade Division Senior Director Ismail Ahmad has revealed to all how the price of petrol and diesel at the pump is calculated in Malaysia.
The formula used to calculate the price of fuel is called the Automatic Pricing Mechanism (in place since 1983) and its function is to stabilize the price of petrol and diesel in the country to a certain extent, via a variable amount sales tax and subsidy, so the retail price only has to be changed if the difference in price exceeds the threshold of the tax and subsidy, at the discretion of the government.
In the table on the left, you can see that the Cost Of Product is not derived from the price of Crude Oil on the NYMEX, but it is based on the Mean of Platts Singapore (MOPS). The cost is the already refined product, which means the refinery cost are already included and indexed in the MOPS.
You may ask what exactly is the MOPS? Many countries in this region base their fuel prices on the MOPS, including alot of ASEAN countries and even Australia. The index is tracked, assessed and updated by Platts, a McGraw-Hill company in Singapore and is based on the daily average of all trading transactions between buyer and seller of petroleum-based products.
A buyer of a finished (refined) oil product will refer to the MOPS index as a better indicator/benchmark of world prices rather than crude oil prices. The MOPS price typically has a premium over the crude oil prices. This is why the Malaysian government uses MOPS to determine fuel prices rather than NYMEX crude oil prices. Unfortunately it is hard to track MOPS prices as individuals because the data is only available to those who purchase it, unlike the publicly available charts from the NYMEX.
Next up is “Alpha”, which is fixed at 5 sen per liter for petrol and 4 sen per liter for diesel. This is sort of a buffer for the oil companies. If the price of the product that the oil companies buy is higher than the MOPS published price, and the difference is higher than Alpha, the oil company will bear the extra cost, and vice versa.
Operational costs should be self explanatory. They are set at 9.54 sen per liter, 8.98 sen per liter and 8.13 sen per liter for the Peninsular, Sabah and Sarawak respectively. Operational costs cover transport and marketing costs. Then comes where the oil companies make money, which is set at 5 sen per liter for petrol and 2.25 sen per liter for diesel. The stations make more money
per liter of petrol – 12.19 sen per liter for petrol and 7 sen per liter for diesel.
Sales tax and subsidies are combined. According to the Sales Tax Act 1972 (this is not something new!), the government CAN collect a maximum sales tax of 58.62 sen per liter for petrol and 19.64 sen per liter for diesel. This comes into effect when the real price of petrol and diesel at the pumps are lower than the fixed retail price. The government can pocket this, or it can revise the fixed fuel price to be lower to remove the difference in price so the savings go into the rakyat’s pocket.
On the other hand, if the fixed retail price is lower than the actual cost of the petrol and diesel at the pumps, the government can pay a subsidy of the same range. Right now the government says it will give a maximum subsidy of 30 sen per liter instead of the maximum allowable subsidy of 58.62 sen per liter, IF NEEDED. This 30 sen maximum subsidy is as part of an improved Automatic Pricing Mechanism, which the Ismail Ahmad says is designed to stabilize fuel retail prices and allow industry players to manage expenditure in a more orderly manner.
So, if you are trying to figure out how crude oil price and pump prices are related, they are disconnected by the use of MOPS.