重新开始！挑战自我之部落格大作战！

On 2 April 2011, the price of Ron 97 rose 20 sen a litre to RM2.70/litre. This makes it the third times increase in year 2011 where10 sen increase to RM2.40 per litre on 5 Jan, 2011 and another 10 sen to RM2.50 on 1 Feb, 2011. The price setting of Ron 97 is determined by the market float of crude oil price and thus it accounted rapid changes.

Ron 95 remains at RM1.90/litre since 4 December 2010 and Diesel remains at Rm1.75 since 16 July 2010. Ron 95 is controlled and subsidized by the government. Thus, Ron 95 accounted least price variances while compared to Ron 97. Ron 95 was introduced by the government in 2009 to mitigate the rakyat from the impact of fuel price’s increases.

I saw many posts on Facebook which criticizing the government for the increases of Ron 97. I wonder whether the government is taking advantage from the rakyat pocket, thus I have done some analysis on this issue.

Figure 1: Comparison between crude oil, Ron 97 and Ron 95 (RM/litre)

*exchange rate at 3.08.

I have made a chart to compare the price of crude oil price and Malaysia fuel price (see Figure 1). The exchange rate is 3.08, following to the current market. We can see that the movement of Ron97 is following to the trend of crude oil price. While for Ron95, the price per litre is lower than the crude oil price. Thus, it is unquestionable that the government is subsidizing Ron95 for the rakyat.

Source: http://paultan.org/2009/02/15/how-fuel-prices-are-calculated-in-malaysia/

In order to find out exactly how much the government is making profit from the trading of fuel, I have found a calculation chart from Paul Tan Automotive News.

According to the Domestic Trade and Consumer Affairs Ministry Domestic Trade Division Senior Director Ismail Ahmad, the Malaysian government uses Mean of Platts Singapore (MOPS) to determine fuel prices rather than NYMEX crude oil prices. This is because the MOPS price normally has a premium over the 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 (Paul Tan Automotive News).

In this case, we just assume that fuel price is determined by the NYMEX. Let’s calculate the cost of fuel in Malaysia.

Table 1.1: Cost of fuel in Malaysia

From Table 1.1, we can see that the government earnings rise from 12.27 sen to 32.27 sec per litre when the Ron97’s price soars from RM2.50 to RM2.70.  For Ron 95, the government is subsidizing 47.73 sen per litre for the rakyat. However, in this case, we just assumed that the cost of Ron95 is same as Ron97, but in fact, cost of Ron95 should be lower than Ron97 as the quality of Ron95 is inferior. For Diesel, government is subsidizing 50.04 sen for each litre.

In this case, it makes sense that a price increase of Ron97 is used to relieve the subsidies of Ron95. If you are not Ron97 users, the price increase of Ron97 wouldn’t bring any impact on you. Therefore, if you are Ron95 users, you shouldn’t criticize about the government since you are being subsidized, although the subsidies come from our own pocket.