Archive for Malaysian Fuel Prices

Minister of Domestic Trade and Consumer Affairs Datuk Shahrir Abdul Samad says we could see the addition of RON95 petrol at the fuel pumps in 2009, perhaps replacing RON92 fuel. The government had actually proposed something like this in April this year, suggesting a change of the fuels offered at stations to subsidised RON95 and unsubsidised RON99 fuel.

The best part or should I say the most hopeful part is he says the government will be trying to price it at the same level as RON92 fuel, which is currently about 10 sen (or 5%) cheaper than RON97 fuel at RM1.90 per liter versus RM2.00 per liter for RON97. If they do this, they also have to work on getting more stations to stock the lower octane fuel as some of them currently only stock RON97 fuel.

Many engines are tuned to run either on RON91, RON95 or RON98, with RON98 being rare but commonly specified for rather aggressively tuned high compression engines like the Honda Civic Type R or even the BMW’s N52 normally aspirated engine family.

It’s not much of a saving, but it’s still something. Even some budget cars like the new Proton Saga with the 1.3 liter Campro IAFM engine requires at least RON95 so it cannot use the cheaper RON92 fuel. Replacing RON92 with RON95 will allow the new Proton Saga to use a cheaper grade of fuel and not pay for something it does not need.

In other related fuel price news, Datuk Shahrir also said the government deserves to profit from low crude oil prices via fuel taxes as it had given out subsidies on per liter fuel prices when crude oil prices were high, as well as the RM625 rebate.

However it seems that the fuel tax revenue that the government is earning right now is only a temporary thing until they decide whether to set a floor price for fuel, which will be discussed on the 1st of December 2008.

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What a turn of events! In just a few months we’ve gone through a record number of petrol price hikes and reductions, the hasty introduction of a lump sum-based subsidy cheque, and more. All because of fluctuating crude oil prices.

As of today, Malaysians have begun paying tax for their fuel again… in fact the government has not had to pay the promised RM0.30 per liter fuel subsidy since the beginning of November 2008 due to the dropping crude oil prices which leads to lower refinery prices.

According to Minister of Domestic Trade and Consumer Affairs Datuk Shahrir Samad, the government also collected taxes for fuel from September 2001 to February 2002, but after that period crude oil had gone up so the government had stopped collecting taxes to prevent fuel prices from going up too much.

From the current price of RM2 per liter from RON97 petrol, roughly 12 sen goes to the petrol stations and roughly 19 sen goes to the oil companies. The balance is RM1.69, but Shahrir says this is actually higher than the refinery price.

While he did not say exactly how much refinery prices were at the moment (this will go up and down according to crude oil prices), he gave an example of RM1.30 per liter. This means the government can make as much as 39 sen per liter of fuel, and this amount will vary as the refinery prices go up and down along the month.

Because of the change of situation and the potential now for long-term income from the sale of fuel in this country, the government Economic Council will be meeting this month to decide on a new mechanism for petrol pricing in the country. Things that could be discussed are how often should price revisions be made, and what kind of tolerances towards crude oil prices should there be. I would imagine they could decide on something like a maximum tax when crude oil prices are low (or alternatively, a floor price for petrol), and a maximum subsidy when crude oil prices are high.

It’s sad to see the government so easily turn its back on its promise of a RM0.30 per liter subsidy, but Datuk Shahrir is of the opinion that the current low fuel prices are quite fair and there’s no need to go drop them too much even though the government won’t have to pay fuel subsidies per liter. He says this additional revenue will be used to strengthen the economy in face of the threat of the recession.

I’m pretty sure the Cabinet is happy with Shahrir’s performance as Minister of Domestic Trade and Consumer Affairs so far. He’s done his job well in helping tighten the government’s coffers, though many would argue it isn’t in the interest of “Consumer Affairs” at all.

All we can do is hope that the money saved and earned will be used in the right channels by those who have the nice job of choosing where to spend the money.

BTW, no one has revealed what the margins, subsidies and revenues are for diesel. Is there room to upgrade to something with less sulphur so we can enjoy cars like the Ford Focus TDCi and a potential upcoming diesel Honda City?

Most of us was expecting a fuel price cut to happen either on Friday or Saturday last week but the weekend came and went and nothing happened. I know some of you are probably getting a little anxious.

But no worries, the good news is there will be a price cut after all, and its once again an amount of 15 sen that will be effective midnight tonight.

The following are the new prices of fuel in Malaysia slashed by 15 sen each effective tomorrow, the 18th of November 2008:

In other motoring-related news, the Deputy Prime Minister Datuk Seri Najib Tun Razak revealed that the Cabinet had discussed recently on whether to declassify the country’s toll concession agreements, but he declined to reveal any result, instead prefering to leave it to the Works Mnister Datuk Mohd Zin Mohamed to make a statement.

As expected, there will be another round of fuel price revisions coming mid-November (likely the 15th of November 2008, this Friday) and Minister of Domestic Trade and Consumer Affairs Datuk Shahrir Samad indicates that it will most likely be a price cut.

The government announced previously that it aimed for the fuel prices to be revised every 2 weeks and it has kept to this for the past month or so quite diligently. Each round of revisions brought cuts, with the most recent being a 15 sen cut to RM2.15 per liter for RON97 petrol and RM2.05 per liter for RON92 petrol and diesel. This came into effect on the 1st this month.

Anyone want to try to guess how much the cut will be this time?

We may not see our fuel prices ever dropping below RM1.92 per liter, if the current Domestic Trade and Consumer Affairs Minister gets his way. Minister of Domestic Trade and Consumer Affairs is of the opinion that the government should scrap the RM0.30 per liter fuel subsidy if the cost of fuel minus the subsidy ended up being less than RM1.92 per liter.

This is because he feels RM1.92 per liter is a reasonable price to pay for fuel in Malaysia. In fact, since a floor price of RM1.92 per liter is being suggested, we could also see sales tax for petroleum introduced if unsubsidised fuel ends up being priced under RM1.92 per liter!

“I believe that we should try as best as possible to reduce or even stop forking out money for fuel subsidy and use it for development and economic purposes. Despite a decline in global fuel price, the amount of subsidy the government has to fork out is still substantial. I also believe that if the price is any lower than what I have mentioned, the public will not practice wise spending because an essential item is cheap,” said Datuk Shahrir.

The new higher fuel prices has forced me to be more frugal with my accelerator pedal. My driving is alot smoother and I managed to stretch my mileage from about 450 to 500km per tank to 620km per tank thanks to a new driving pattern. But at the same time, you have to acknowledge that those from the really poor income bracket need all the help they can get and would definitely benefit from having a fuel price lower than RM1.92 per liter without increasing their consumption unreasonably!

Government fuel subsidy expenditure for the months of June, July and August 2008 was RM1.97 billion, RM1.95 billion and RM1.42 billion respectively. In addition to that, the government also paid out an additional RM2.5 billion between April to September 2008 for the RM625 per vehicle subsidy.

“The government has spent up to RM16.8 billion just on fuel subsidy and RM2.5 billion on rebates for motorists and motorcyclists. All that means from January to December, we’ll be spending about RM19 to RM20 billion. If we can save some money on subsidy, that savings will be spent to tackle the issue of economic growth,” the Minister added.

The RM625 subsidy will be gone next year. In its place will be a new system that has yet to be decided by the government.

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As indicated earlier this month by Minister of Domestic Trade and Consumer Affairs Datuk Shahrir Abdul Samad, a cut in fuel prices have been announced effective from tomorrow, but despite a big fall in crude oil prices worldwide, the reduction for all three fuel types is a maximum of 15 sen a liter.

According to the government, this is supposedly to help the petrol dealers cope with losses of existing fuel stock. However Shahrir noted that there are some in the government who prefer more significant cuts at one go. I reckon if crude oil prices continue to remain low, the next revision of prices that is likely to happen on the 15th of November 2008 will another maximum drop of 15 sen until it reaches a proper low price according to market rates.

The following are the new prices of fuel in Malaysia slashed by 15 sen each effective tomorrow, the 1st of November 2008:

Minister of Domestic Trade and Consumer Affairs Datuk Shahrir Samad has indicated that the prices of petrol and diesel could be reduced again by the end of October 2008 as world crude oil prices were still on a downward trend.

He added that revising the price of petrol and diesel is easier now as the matter no longer had to be discussed in the Cabinet, but instead can be decided through a meeting of a few key ministers chaired by the PM. I think as earlier promised, we are slowly moving towards having a floating price for petrol and diesel that is revised twice a month, with potential to be even more frequent in the future.

The last fuel price slash was a couple of days ago on the 15th of October 2008. RON97 fuel was slashed 15 sen from RM2.45 per liter to RM2.30 per liter, while RON92 and Diesel fuel were slashed to the same RM2.20 per liter.

Interestingly, the minister also mentioned that the government cannot bring down prices drastically as it could have adverse effects in the supply chain, but it seems that they have no qualms about increasing it drastically as proven in the past.

I suppose he is referring to the petrol station operators suffer losses if fuel price goes down by a large margin while they still have stocks of fuel purchased at the old price. Even when fuel prices went up, they had something to complain about - the margin of profit for every liter sold which they claimed remained the same while the cost of fuel went up.

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It was just a few days ago that Minister of Domestic Trade and Consumer Affairs Datuk Shahrir Abdul Samad said a fuel price cut could be coming at the end of the month, but it looks like the government has decided to drop the prices earlier - tomorrow! The amount slashes is also more than the maximum of 12 sen that was previously indicated.

The following are the new prices of fuel in Malaysia slashed between 10 sen to 20 sen, effective on the 15th of October 2008:

Based on the average monthly fuel price so far, Datuk Shahrir Samad has indicated a probable reduction in petrol prices of up to a maximum of 12 sen by the end of October 2008. If the maximum of 12 sen reduction is achieved, this would mean RON97 fuel could cost RM2.33 per liter, down from the current RM2.45 per liter. This maximum drop is possible if crude oil prices average out below US$104 per barrel.

Our petrol price is dependent on two factors - the price of crude oil itself and the exchange rate between USD and MYR. Datuk Shahrir mentioned that at current exchange rate prices, oil per barrel has to be US$72 for a RM1.92 petrol price. If we want to enjoy a RM1.92 price with oil costing more than US$72 per barrel, our ringgit instead needs to appreciate against the US dollar.

Minister of Domestic Trade and Consumer Affairs Datuk Shahrir Abdul Samad says it is possible for further reduction of petrol and diesel prices in November 2008 if the average crude oil prices for October 2008 remain below US$104.

Let’s just pray that this happens! The current lower prices are partly due to the failure of the US$700 billion US financial sector bailout to pass through the US House of Representatives voting. The Bush administration is now trying to pass a revised bid and if this goes through, we may see crude oil prices go up again in anticipation of higher demand from the US, who are the biggest consumers of the commodity.

The government dropped a bomb on us on the 5th of June this year by raising RON97 petrol prices from RM1.92 per liter up to RM2.70 per liter. It then reduced prices to RM2.55 in August and RM2.45 in September.