Wednesday, September 24, 2008

ID-Ten-T problem that plague Malaysians - Malaysiakini

"The recent fall in world oil prices plus the weakening Ringgit gave the government a window of opportunity to lower pump prices (of fuel)".

So sez flip-flopping lame duck Prime Minister Badawi. How is it justified? How are pump prices derived? Well, that's a protected secret within the Finance Ministry and to hold it could mean being charged under OSA.

Are we being taken for a ride? Have the UMNO government been treating us as fools who can't calculate? Is there something called a fuel subsidy today as claimed by Shahrir, the Domestic Trade and Consumer Affairs Minister? In due time, readers, you will see how this minister is lying through his teeth!

How does currency fluctuations affect the pump prices of fuel? Is Shahrir trying to hide from the fact that a money flight away from the country has deep impact on the nation, especially in the current issue of fuel. RM125Billion flying away from Malaysia is not a small thing that we can close one eye to.

The Ringgit had strengthened to about RM3.15 to the greenback recently only to weaken again to the current level of about RM3.42. Let's play with some maths. But before that, let us also remember that crude oil had retreated to about US90.55 lately.

As the price of crude fluctuates daily, we shall use an average price. Ok, fine, simple calculation. Average of 90 and 120 makes 105, and that's about the current trade price of crude oil at this moment.

So, we shall have 2 sets of calculations. One at RM3.15 while the other at RM3.42. And we shall contra the claimed subsidy of 33 sen against the cost of refining, transportation, commission etc, at 32 sen. Fair huh?

US105 X RM3.15 / 159 = RM2.08

US105 X RM3.42 / 159 = RM2.26

Clearly, due to the difference in exchange rate, there's a difference about 18sen!

Next, have we forgotten that we are a nett oil exporter? That means, we are profiting from oil. Let's do some simple maths how we earn from fluctuations in exchange rates once more. At the end of the day, what matters is that, as seller, the cash comes back home. That means, the end results of the transaction would be Ringgit.

Again, we use RM3.15 and RM3.42. Let's assume crude oil remains stagnant and is fixed at US100 after our great UMNO government manages to peg both the Ringgit and control the price of crude oil! (hahahaha)

At US100 per barrel, the end result of cash flowing back to this land called Malaysia, taking into account the fluctuation of currencies, and using the two figures above, it is clear that a weak Ringgit favours the seller, which is, Malaysia.

So, on the one hand, a weak Ringgit favours the country but does it work the same way for the consumers who happen to be the rakyat, the boss?

Not enough evidence that we're being taken for a ride? Let's look at pump prices in United States.

Current pump price for different grades are;

Ron 98 : USD 3.32 / gal
Ron 95 : USD 3.21 / gal
Ron 92 : USD 3.02 / gal

Now, don't let the figures deceive you. That's what the UMNO government wants you to. First, we must remember that oil is tax-free in Malaysia while in the United States, the average taxation per gallon of fuel is USD0.494. Average because different state in America imposes different tax rate.

So, let's adjust the pump price of fuel deducting the tax.

Ron 98 : USD 2.826
Ron 95 : USD 2.716
Ron 92 : USD 2.526

America practises free trade and therefore I deem this the best comparison to our local pump prices of fuel. So next step, 1 US gallon equals 3.785 litres. What fuel grades available locally is Ron 97 and Ron 92 and therefore we drop Ron 95. However, bear in mind that Ron98 is higher grade than Ron 97. We shall use the current exchange rate of RM3.42 to a greenback.

Therefore, pump price of the said fuel in a free market, the United States of America are;

Ron98: USD2.826 / 3.785 = USD0.7466 per litre or RM2.55 per litre

Ron92: USD2.526 / 3.785 = USD0.667 per litre or RM2.28 per litre

Ah ha! clearer now? Let's compare these prices from a free market to our Malaysian market that is claimed to be subsidised:

Ron98: USA (RM2.55) vs Malaysia (RM2.45)

Ron92: USA (RM2.28) vs Malaysia (RM2.30)

Does anyone of you see something? Is there something wrong?

Kanasai! As it is, it looks like after a subsidy of 33 sen, our Ron92 is more expensive than in  America!

And maybe, just maybe, if the funds did not take flight from Malaysia to a tune of RM125Billion and that the Ringgit didn't weaken, supposing that it stays at about RM2.20 .... well??

The UMNO government always tells us that this is an ID-Ten-T problem and the people swallow everything A to Z. Hey people, wake up!

ID-Ten-T is simply ID10T if you replace the TEN with numerals!

Kanasai! This ain't subsidy! This is cheat!


rai said...

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Do you calculate the refining/production cost? Out of the 1 barrel of crude oil, 15-25% will used to refine the crude oil to become petrol.

Each difference RON have different refining/production cost. The higher the RON the more expensive it is.

Beside that, you must know not only refining/production cost. How about the fuel tanker transportation cost and Petrol Station/Company operation cost?

In Malaysia our fuel don't have taxes. Malaysia are not top 10 oil producer, in fact rank 30-40 in the world.

Russia, US, Canada and UK generation more oil than Malaysia, does their government subsidize their petrol? No, infact they are not only using the global petrol market price, they have fuel tax.