Archive for Malaysian Fuel Prices

Euro 2M diesel is now here in Malaysia ahead of the 1st September 2009 schedule. It is priced at RM1.70 per liter. You will be able to find it at all Petronas stations from the 1st onwards in the form of the new Petronas Dynamic Diesel, that’s sold with an additive Petronas calls SINAR D07. Petronas says the previous additive introduced in 2006 was known as SINAR D05.

The new Petronas Dynamic Diesel meets Euro 2M standards, which means a maximum of 500ppm of sulphur in the fuel. This is a huge improvement over the previous standard which limited sulphur content to 3000ppm. But don’t think all diesels were that high in sulphur all this while – a research by Petronas which I pointed to back in 2007 showed that out of 6 brands of diesel at that time (2004), only one had 2800 ppm of sulphur, with the rest ranging from as low as 200 ppm to 500 ppm.

The availability of Euro 2M diesel fuel may spark an interest in both the car manufacturers and consumers to offer diesel versions of passenger cars and buy these diesel-powered products respectively. However one problem would be the fact that most modern diesel engines are designed to run on Euro 3 (350ppm), so the new Euro 2 diesel may still not be good enough. Euro 4 requires 50ppm, and Singaporean diesel such as Shell ULSD is already compliant.

Companies that are confident of a big enough volume might be willing to do some modifications to suit our market and it is very likely that this will only happen at the more expensive segments where the margins are larger and easier to justify. For cheaper cars, consumers may not be confident enough in diesel cars and most may still shy away from the benefits of a turbodiesel because of the certain negative characteristics of a diesel engine such as the sound and smell.

The worst part is that even for those who are very eager to try diesel cars for the economy it offers, the norm is for diesel powerplants to cost more than a petrol engine, so this may drive up the prices of diesel-engined models to a level too shocking for the budget-conscious consumers at that level to accept.

The BMW 320d Touring was offered here by BMW Malaysia Sdn Bhd when the E90/E91 3-Series was first launched. This model is now gone when the facelift was introduced as response was low.

In the second hand car market, the new diesel may spark a new interest in second hand diesel-powered luxury cars cars such as the Mercedes-Benz E270 CDi or the BMW 530d as a powerful and fuel efficient alternative. The E270 CDI can be found priced at a good 15% to 20% cheaper than its petrol-powered siblings of the same year and the massive low-end torque of a turbodiesel suits the kind of relaxed drive that an E-Class buyer typically looks for.

We will see more fuel companies launching their improved Euro 2 diesels over the next few days leading up to the 1st September 2009 deadline for the new standard to be introduced. The fuel companies will definitely take this opportunity to rebrand their fuels.

Click image to view presentation, navigate with next/prev buttons

Chevron, the company which operates Caltex stations here in Malaysia, has released some information to help consumers with the upcoming switch to a RON95 and RON97 fuel offering at the pumps from the present RON92 and RON97 offering.

The government plans to hike up the price of RON97, and price the new RON95 between current RON92 and RON97 prices. We’ve talked about RON95 and octane before a few times in the past, but here’s some from the horse’s mouth.

The presentation deck is actually quite interesting as it explain the differences between RON, MON, octane satisfaction requirement survey results in countries that offer a wider range of fuel octanes on sale compared to Malaysia, and other interesting bits such as the percentage of sales of each octane grade in various other countries.

Click the image above to view a presentation about RON and fuels in general (use the prev and next buttons to cycle through the slides), or look after the jump for a FAQ as well as thumbnails of all the slides.

Click here to read the rest of Chevron explains RON95 octane fuel

So, has anyone tried out the RON95 fuel with their cars at the stations in Putrajaya yet? I have yet to try it out on my cars. I know some of you who have been happily using RON92 perfectly all this while must be a little miffed by having to pay a little more money unnecessarily for a better octane grade that you don’t require. But the introduction of RON95 replacing RON92 will be beneficial for those who have cars that support RON95 and have so far been paying a small premium for the jump between 95 and 97.

First of all I think it’s necessarily to clear some misconceptions between the levels of fuel grades available in Malaysia. First of all, all petrol sold at consumer pumps in Malaysia are unleaded. This includes the current RON92, and the upcoming RON95. There are only a few stations that sell RON92 in Malaysia due to low demand. Some petrol stations like Shell sell Shell Regular RON92 at some stations which are usually stations that used to be Projet stations in the past. These stations do not sell V-Power. Only some Petronas stations sell a “red” Prima 92 alongside their Primax 3 which is RON97. The problem is with the usage of a red instead of green colour for RON92 fuel, which leads consumers to believe RON92 is leaded fuel. Stations like BHPetrol and Caltex sell RON92 and RON97 consistently at every station.

Secondly, fuel octane does not necessarily represent fuel quality. All petrol come from the same if not similiar base supply. Most of the time it is the additive package that is mixed together with the fuel that determines whether fuel performs better than another. Shell Super and Shell V-Power Racing are both RON97, but V-Power Racing uses a different additive mix. Companies like BHPetrol and Caltex use identical additive packages for both their RON92 and RON97 products, and furthermore BHPetrol actually mixes 800ppm which is double the recommended amount of additives of 400ppm by their supplier into their fuel.

These additive packages can contain ingredients such as detergents to clean your engine, or friction modifiers to help reduce friction between the various engine components that are being flung around at such high speeds and temperatures.

What you need to do is find out whether your car can run on RON95 or not. This information should be available in your car’s manual or on a sticker near your fuel flap. I wrote to Proton and they claim that all Proton cars should be able to run fine on RON95 except some older carburetor cars, which need an ignition timing adjustment fix. You may want to contact your Proton service center to see if they can do this adjustment for you before you start to fill up with RON95. This is so that you can avoid any damage no matter how little or significant caused by knocking due to insufficient fuel octane.

And then of course there will be some of you who will decide to continue to use the more expensive RON97. In fact some companies which offer both a regular and premium RON97 product now may decide to discontinue the regular RON97. Which brings us to another matter…

I would like to request a favour from you dear readers – if you have the free time to answer a short survey consisting of less than 10 yes or no (including a few A or B) answers. It should not take you more than 3 minutes. The questions revolve around your thoughts on the type of fuel grades in Malaysia.

At the end of the survey you will also be asked if you would like to participate in a fuel product test, where selected respondents will be given a free tankful of a new fuel in exchange for your opinion on how the new fuel feels like. If you would like to help further, please also spread the word and let everyone know about the survey – the more data obtained, the most accurate the results will be. Thank you so much!

Despite the change of ministry leadership, the proposed restructuring of fuel grades and pricing will go ahead as scheduled. The new Domestic Trade and Consumer Affairs Minister Datuk Seri Ismail Sabri Yaakob has announced that the price of RON97 fuel will be increased to RM2.00 per liter from the 1st of September 2009 onwards, which is also the date that RON95 and Euro 2M diesel are expected to be introduced into the market. That is an RM0.20 increase from the current price. We’ve paid RM2 per liter for RON97 before as that was the price during the period of the 18th of November 2008 to the 2nd of December 2008.

It’s not known yet at the moment what the new RON95 grade fuel (which replaces RON92 in the market) will be priced at, but when Datuk Shahrir was the minister he said that RON95 would be priced at the same price as RON92, with the income from RON97’s hiked price used to subsidise RON95 fuel.

Hopefully this is still the plan. Get ready for massive jams at the petrol stations on the last day of August!

UPDATE: RON95 fuel will be replacing RON92 and will be priced at RM1.75 per liter, which is up RM0.05 from RON92 prices. Although nationwide roll-out is only expected to be fully ready by September 1st 2009, the new RON95 grade fuel is already available at 2 Petronas stations in Putrajaya. In addition, there will not be any ceiling price for RON97 fuel so petrol companies can feel free to come up with premium versions such as Shell V-Power as long as they inform the government.

Our Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad (or minister minyak as some of you call him) says he will resign from his Minister post on the day Najib takes over as PM, after his defeat in the recent UMNO general assembly.

“The UMNO election was always a good place for an assessment of ministers or elected officials. So it shows that in the delegates’ view, I have not done well enough. I accept their verdict,” says Datuk Shahrir. He did not succeed in being elected into the UMNO Supreme Council in the general assembly that is currently ongoing this week.

This isn’t intended to be a politics story of course. The point of writing this is that if his job really goes to someone else, there is a possibility that recent developments with our fuel such as the switch to a RON95 and RON97 system and Euro 2 diesel might change, if the new head honcho has his own ideas. Or it might just go on.

It was previously announced that RON97 petrol would have its price increased (the plan was originally to float) in July 2009 to make way for a cheaper RON95 grade fuel replacing RON92 at the original RON92 prices.

This July deadline could have been pushed back as Datuk Shahrir Samad has now announced that RON95 fuel will be available from September 1st 2009 onwards, so changes to RON97 (if any) would also likely be pushed back to coincide with the date. You can’t have a two month period of having a higher priced RON97 but with no RON95 as an alternative can you? Datuk Shahrir also revealed that the higher grade Euro 2M diesel will be introduced on the same date to replace the current grade of diesel and will be priced the same as the outgoing fuel.

In related news, the RM625 cash rebate exercise that was supposed to end on the 31st this month has been extended to the 14th of April 2009 to give people who qualify but have not claimed their rebate yet time to claim it. Just a refresher – the rebate is for vehicles with engines 2,000cc and below, and for pickups and trucks with engines 2,500cc and below. Motorcycles 250cc and below are eligible to RM150.

There has been alot of news, flip flops and other announced “decisions” made leading up to this latest announcement, so please read the previous related posts linked below:

Related Posts:
RON97 will not be floated in July, but will be priced higher to make way for new RON95
What is RON (Research Octane Number)?
Cheaper RON95 fuel to be introduced mid-2009
APM: How fuel prices are calculated in Malaysia
Malaysian diesel to be Euro 2M grade in 2009

More updates on the prices and grades of fuel in Malaysia – Datuk Shahrir Samad said RON97 would not be floated in July 2009 but instead it will have its priced increased by reducing subsidies. He said floating it would not be feasible at the moment as apparently by floating it, the price per liter would shoot up by 50 sen, which at current RM1.80 per liter rates would result in a new RM2.30 per liter price. RON95 will be introduced to replace RON92 but will be priced at a the same price as RON92 via extra subsidies redirected from RON97. He hopes this will make Malaysians use the cheaper RON95 fuel.

He told The Star that Singapore, Taiwan and Indonesia have been using RON95 grade fuel without any problems. The thing is, the difference between RON98 and RON95 in Singapore is less than S$0.10 at the moment. Dollar for dollar, that is a small difference, and people who find that they need RON98 can do so without causing much pain to their pockets. It sounds like in Malaysia the difference between RON97 and RON95 will be higher than the current 10 sen gap between RON97 and RON92.

I have actually written to him twice about how RON95 would sometimes be unsuitable for older high compression vehicles designed to run on RON95 as carbon deposits and other wear and tear would actually increase the engine’s RON requirements and cause the engine to knock when RON95 is used. These carbon deposits can heat up in a hot engine and cause pre-spark detonation.

Older cars/engines without a knock sensor to automatically adjust ignition to compensate for knocking are especially prone to damage, but the thing is for a knock sensor to do its job the engine actually has to start knocking first before the knock sensor can “sense” it so there is still some potential for damage!

This is bad for the engine! If you assume a typical reason that a person using an old car with an old engine because he or she is not very well to do and cannot afford something newer, I am sure you don’t want to put that person into a situation where he has to fork out more money in maintenance because of high temperature detonation damage!

If you want to look at it from the rakyat’s point of view, instead of pricing RON97 higher to encourage RON95 consumption, the government should think of ways to educate people about why they should just save their penny and use RON95 instead if their cars can take it. Tax the “premium” RON97 Shell V-Power as much as you want but leave the option open for decently-priced RON97 fuel for those who really need it. But then again you could also say we should all just learn to adjust to what some say are impending permanent high fuel prices and get on with a new “gaya hidup”.

Related Posts:
What is Research Octane Number (RON)

There will be some massive changes to the grade and price of fuel we buy at the pumps in Malaysia this year. First up is the previously announced phasing out of RON92 fuel for a new RON95 fuel grade, which will be subsidised as the government assumes this is the grade that is suitable for the majority of users in Malaysia.

The second major change is a switch to a floating system for RON97 petrol according to international oil prices from July 2009 onwards. It was not indicated whether this would be a daily, weekly, twice a month or monthly float. Since prices are now determined twice a month perhaps it may change to a more frequent weekly float. RON97 is considered by the government to be a “premium fuel’ and thus will not be subsidised. Petrol retailers also told Business Times that not only will RON97 not enjoy subsidies, it might even be taxed!

Lastly, diesel in Malaysia will be upgraded from current MS123 standards to Euro 2M standards.

Related Posts:
Cheaper RON95 fuel to be introduced mid-2009
APM: How fuel prices are calculated in Malaysia
Malaysian diesel to be Euro 2M grade in 2009

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.

Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad says the ex-refinery prices of petrol and diesel in Malaysia have not dropped in tandem with crude oil prices so there is unlikely for prices at the pump to come down, or go up either. He added that ex-refinery prices are not openly available. Apparently ex-refinery prices used to move together with crude oil prices but now it is no longer the case, but he did not elaborate why it was no longer the case.

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