Archive for Malaysian Fuel Prices

Prices of crude oil dropped about 10% yesterday on the NYMEX after the US House of Representatives rejected the Bush administration’s bid for a US$700 billion bailout of the American financial sector called the Emergency Economic Stabilization Act of 2008.

November delivery light sweet crude dropped as much as US$11.85 at one point, finally settling down at US$96.37 a barrel, down US$10.52. In London, Brent North Sea crude for November dropped US$9.56 to settle at US$93.98 per barrel.

It previously spiked 16% (up to US$120.92) partly in anticipation of a positive outcome to the very same bailout bid, and a few other reasons such as the expiry of front-month futures contracts and weakening of the US dollar. At the time of that spike November contract delivery prices were US$109.37. December and January contract prices are now roughly the same as November’s price at US$96.09 and US$96.37 respectively.

“Oil prices should remain under downward pressure. Oil traded for the last five years on fear of supply interruptions. It is now trading on fear of economic collapse,” said WTRG Economics analyst James Williams.

With this new news, are the government going to reduce petrol and diesel prices again? Or will they say it not make a difference to their coffers because of other reasons such as the ringgit weakening against the US dollar?

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The government has reduced the price of fuel in Malaysia by RM0.10 per liter across the board for all three types of fuel.

Minister of Domestic Trade and Consumer Affairs Datuk Shahrir Samad said the government could only manage a RM0.10 reduction because although crude oil prices have dropped, the ringgit has depreciated against the US dollar.

He added that according to calculations the government could only reduce prices by RM0.07 sen but decided to increase subsidy by another RM0.03 sen to make it a total of a RM0.10 price reduction. It would be interesting to see how this is calculated.

The following are the new prices for petrol and diesel in Malaysia, effective tomorrow:

This means that for a full tank of 50 liters, you get to save RM5 per fuel tank or between RM20 to RM30 depending on whether you fill up between 4 to 6 times a month. I hope this means something to those that are needy out there, but as for me I do not feel like I will be saving much. Selamat Hari Raya!

Our hopes for a lower fuel price after the Cabinet’s meeting tomorrow could be affected due to this latest development in world crude oil prices. Oil prices soared from a low near US$90 range a barrel last week up to US$120.92 per barrel today for October contract delivery US crude. However, November contract delivery prices settled down at a lower price – US$109.37.

Analysts say this is because of the expiry of the front-month futures contract and the weak US dollar. “The market went crazy here and it looks like the weakness of the dollar was a fuel for the sharp price increase. NYMEX October crude was also expiring and that provoked short-covering,” said an analyst at Summit Energy.

A Bank of Ireland analyst said a key driver of the price hike is the US rescue package for the banking industry, which has apparently changed the sentiment in the oil market.

A bail-out for the US financial sector will mean continued demand for energy in the country, which has the highest consumptions of the commodity at over 25% of total world consumption.

NYMEX – Light Sweet Crude Oil Contract Detail – October 2008
NYMEX – Light Sweet Crude Oil Contract Detail – November 2008

Related Stories: (external sources)
Regulators review huge NYMEX oil price surge – Reuters
Oil prices soar to record one-day gain – Times Online
Oil posts biggest ever 1-day gain – CNN
Oil prices jump, partly from ’short squeeze’

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We could be looking at another reduction in petrol prices after this Wednesday’s cabinet meeting where fuel prices and the possibility of a reduction will be discussed, according to Minister of Domestic Trade and Consumer Affairs Datuk Shahrir Samad.

Datuk Shahrir previously said fuel prices could drop before Hari Raya Aidilfiltri so we can “celebrate Hari Raya happier.”

The last reduction in fuel prices was on the 23rd of August 2008 from RM2.70 per liter to RM2.55 per liter for RON97 fuel.

According to the NYMEX, crude oil is currently US$102.73 per barrel. A few days ago it was less than US$100 per barrel. Do you think RM2.30 per liter is possible? Will it make a difference?

Minister of Domestic Trade and Consumer Affairs Datuk Shahrir Samad says petrol prices may go down further, and may have hinted at a possible reduction in price sometime before Hari Raya. “Looks like fuel prices are stable and I hope they continue to be so and come down a little so we can celebrate Hari Raya happier,” he said to Bernama at the Bernama Web TV launch yesterday.

He said a reduction is possible as there is a slight downward trend in fuel prices, with crude oil costing US$109 a barrel this week compared to US$115 a barrel two weeks ago.

The government raised fuel prices on the 5th of June this year from RM1.92 per liter to RM2.70 per liter for RON97, RM1.88 per liter to RM2.62 per liter for RON92 and RM1.58 per liter to RM2.581 per liter for diesel fuel

It then dropped it on the 23rd of August 2008 to RM2.55 per liter for RON97, RM2.40 per liter for RON92 and RM2.50 per liter for diesel.

Minister of Housing and Local Government Datuk Seri Ong Ka Chuan said the cabinet agreed on Friday to review the price of fuel sold in Malaysia every 15 days or twice a month instead of once a month. He did not say when this would start.

Pump prices would take into consideration the average price of fuel for the 15 days and after deducting a fixed subsidy (currently supposed to be at RM0.30 per liter) and the prices at the pumps will be adjusted accordingly.

He assured the rakyat that despite this new arrangement, the government would not revise prices to above RM2.70 per liter for RON97 fuel even if the situation calls for it. The government will simply increase the amount subsidised to keep it at a max of RM2.70.

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The Prime Minister has announced that the prices for RON97, RON92 and diesel fuel will receive small reductions of between 8 to 22 sen as of tomorrow.

With the new price structure, RON92 is now cheaper than diesel fuel. You may want to pump that if your car allows it. It was previously 4 sen more expensive than diesel fuel.

With diesel so expensive now, when is Malaysian diesel going to be upgraded to modern standards instead of the current MS123 standard?

The following are the new prices:

I’ll believe it when I see it at the pumps.

Petrol prices at the pump will be switched from its current fixed price of RM2.70 per liter to a floating amount according to the month’s average current market rates with a fixed subsidy of RM0.30 per liter. This floating amount will be capped to a maximum of RM2.70 per liter (current price), which means the 30 sen subsidy will increase to cover the higher cost of fuel if it increases over RM3.00 per liter.

The government said June 2008’s subsidy was an average of 64 sen per liter as crude oil averaged at US$132 during the month, but it has peaked at US$149 recently. According to calculations provided by the dailies based on August 1st’s crude oil price of US$128.19 per barrel of 159 liters, the price of RON97 petrol could have dropped from RM2.70 per liter to RM2.64 per liter (RM2.62 production cost based on crude oil price + transport, commission and misc cost of RM0.32 per liter – subsidy of RM0.30 per liter).

It’s time to monitor August 2008’s average monthly crude oil price closely. What we want is for average oil prices to drop to USD128 and below, then we will be able to see a nice reduction in petrol prices on the 1st of September.

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For those who have renewed their road tax for this period and have been delaying collection of the RM625 rebate because of lack of time or any other reason, there is good news for you. Pos Malaysia Berhad now allows collection of fuel rebates through its online portal at Pos Online.

All one has to do is sign up for a Pos Online account and login with your username and password. Then go to Cash Rebate Online and click on Cash Rebate. Key in your number plate and the other information required. You can then select either Money Order or Bank Account Deposit as your mode of payment. Just fill in whatever they ask and if everything goes through you will receive an online receipt which you can print for future reference.

For the Money Order option, a Money Order will be posted to your registered address within 7 working days of the online transaction. For the Bank Account deposit option, your money will be credited directly into your bank account within 3 working days. For those who renewed their road tax before it expires, you can only perform the rebate transaction online 3 days after the road tax renewal. If you experience trouble with the system, give 1-300-300-300 a ring.

Kudos to Pos Malaysia for developing this win-win system where motorists are now able to claim their subsidy without wasting time at the post office, and at the same time Pos Malaysia gets more exposure for its new Pos Online service. There is no additional service charges to the motorist for using the online system.

Anwar Ibrahim has been using fuel prices as ammunition for his government reform campaign (see debate between Anwar and Ahmad Shabery), but this latest move by the ruling government may just force Anwar to look for something else.

Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad told Bloomberg that the government may consider dropping fuel prices of petrol and diesel in Malaysia if the cost of crude oil drops below US$125 and stabilizes and is sustained for at least 3 weeks. The government may also continue subsidizing fuel for the next 10 years instead of cutting off fuel subsidies much earlier as planned.

However the report is just full of “may” and “maybes” and “why nots”… nothing is concrete, so no one should get their hopes high. Even if prices drop, it may go up again.

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A total of 40,231 petrol-powered taxi owners in Malaysia will get a 78 sen subsidy on petrol, bringing it down to the original price of RM1.92 per liter for RON97 octane. This subsidy is limited to 720 litres per month, or a maximum of RM561.60. The subsidy will be controlled via a fleetcard system, similiar to the fleetcard used for subsidised diesel. This will cost the government RM271 million a year.

Datuk Shahrir also said that the savings from reduced subsidies for the government this year now amounts to only RM2 billion instead of the initially estimated RM4.4 billion as the price of crude oil has gone up.

In other public transport fuel-related news, the government will be pushing for buses to use CNG (compressed natural gas) instead of diesel. This will increase the consumption of CNG in this country, currently used by NGVs consisting of 94% taxis, 0.4% buses and 5.6% private vehicles. It won’t be a “dream fuel” forever as the price for CNG is also expected to go up in the future.

UPDATE: Taxi drivers have been asking for a minimum charge of RM3 instead of the current RM2 when a passenger gets into the cab, and are still persistent in requesting for the higher charges despite the new petrol subsidy. Malaysian Taxi Drivers and Owners Association secretary Hiew Pow Man says this is because the new subsidy doesn’t do much to help taxis as most run on NGV.

Keep yourselves free at 9pm tonight as there will be a debate between de facto PKR leader Datuk Seri Anwar Ibrahim and BN Government Information Minister Datuk Ahmad Shabery Cheek called “Form the government today, reduce fuel prices tomorrow”. The political debate mainly focuses on the ability for the government to sustain high fuel subsidies as an oil-producing country amidst sky-high crude oil prices.

Each debater will be allowed one person each on the panel. Dewan Bahasa dan Pustaka Chairman Datuk Johan Jaahar will be the moderator.

We will be able to hear in full why the government refuses to (and cannot) use Petronas profits to subsidise fuel. Datuk Ahmad Shabery Cheek hopes the debate will be able to provide a clear picture. Despite the hiked fuel prices, the government claims that the cost of fuel subsidies from January to June 2008 were higher than the entire year of 2007. RM4.006 billion was spent on petrol subsidies, RM5.056 billion for diesel subsidies and RM1.1188 billion for LPG subsidies. This amounted to RM10.25 billion, higher than 2007’s RM8.77 billion amount.

You can watch the live telecast of the debate on terrestrial TV9, Astro’s channel 119 (TV9), 501 (Astro Awani) and 502 (Bernama TV). TV9 can be watched online at IP Global TV.

UPDATES: 9:20PM – Anwar says if the Pakatan Rakyat forms a new government, he will drop the price of fuel by 50 sen, which would be RM2.20 per liter rather than current levels of RM2.70 per liter.

9:31PM – Datuk Ahmad Shabery Cheek decided to poke at the oppositions’s supposed street demonstrations. He must have forgot that massive traffic jams were caused all over the Klang Valley by the police being mobilised to set up road blocks randomly because of an SMS to Home Minister Syed Hamid Albar alleging that there was going to be an illegal mass rally outside the Parliament. The same alleged rally that did not exist, did not happen and was denied by the opposition. I personally went through three blocks and they were just obstructing traffic and waving people on after they have been inconvenienced for no reason. We all know fuel efficiency is worst at slow city speeds. How much fuel and time were wasted during these jams?

9.36PM – Anwar says the petrol price will be reduced NOT by taking more of Petronas money but from existing government income including existing taxes from Petronas and other incomes, but by tightening the government’s spending which he describes as “bocor”. He says RM2 billion ringgit yearly can be saved by reducing TNB excess standby capacity from 40% to 20%, a situation which only benefits the IPPs which also benefit from getting subsidised gas.

View recordings of the debate in 6 parts after the jump.

Click here to read the rest of Fuel Price Debate at 9PM tonight!

The Petrol Dealers Association of Malaysia is once again bringing up something they have brought up back in 2005: credit card commissions that are eating into their profit margins. They have issued a letter to all of its member petrol stations asking them to stop accepting credit card payments and diesel subsidy cards for fuel from yesterday onwards.

The government will be meeting with PDAM on the issue of increasing commission charges from 3% to 6% for fuel paid via credit cards. The PDAM currently makes 3% from each liter of petrol. If payment is via credit card, PDAM has to pay 1% to the bank, which reduces the profit from 3% to 2%, which they say is hurting their profits especially in this age where motorists are reducing their petrol usage.

What I do not understand is why the proposed new 6% profit margin for credit card usage instead of just 4% (which is 3% and the additional 1% bank charges)? Where is the justification of the additional 2%? I am not 100% sure if my calculation is right, but an increase of commission charges to 6% would result in RON97 fuel being priced at RM2.781 if paid via credit card, while remaining at RM2.70 if paid via cash.

UPDATE: According to this report by the Malay Mail, the 1% credit card commission charge currently accounts for an average of between RM6,000 to RM20,000 per month per petrol station. An increase of commission to 6% would mean extra profit of between RM18,000 to RM60,000 per month for each petrol station.

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The government will be extending the RM625 cash fuel subsidy to private vehicles with engine displacements up to 3,000cc in Sabah and Sarawak as four-wheel drive vehicles are more commonly used there. The PM said this was for vehicles registered to transport goods… I am not really sure what that means. More details will probably be released later, so stay tuned for more updates!

500 fuel stations in border town areas between 30 to 50km from the border to Thailand in the north and the border to Singapore in the south have agreed to set up separate fuel pumps for foreign-registered vehicles that will charge current market rates to fuel up.

This was announced by Deputy Prime Minister Datuk Seri Najib Tun Razak yesterday, so there is unlikely to be any random contradictory changes in the announcement the next day as observed with the last fuel pricing change (something must be up between Shahrir and the PM).

Petrol station operators will be responsible to look at their customers number plate to see if it is a local or foreign registered cars. But what’s to stop them from profiteering from letting them pump at market rates plus a little bit of “incentives”? One way would be to let petrol stations earn more profit margin on fuel pumped into foreign cars, or we will probably have to rely on citizen police.

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