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Wednesday, June 25, 2008

Another calculation

I've got a forwarded email which talk about the current fuel situation. This guy really go all the way to calculate the exact price for petrol. It is another version of the calculation, at least different from my calculation. The email content is as below:-

We know the international rates are above the USD 130/barrel. We understand the fact that the fuel prices are increasing worldwide and we also know that major scientist are still contradicting on why this phenomenon is happening. Some blame Bush and his plunders around the world and some blame climate change and there are others which say petroleum 'wells' are getting scarce.

Again we go back to numbers to be more straight fwd

1 barrel = 159 liters x RM2.70/liter = RM 429 or USD 134

On 1 hand, we are paying the full cost of 1 barrel of crude oil with RM2.70 per liter but on the other hand the crude oil only produces 46% of fuel.

Msia sells crude oil per barrel at USD130 buys back Fuel per barrel at USD134. And not forgetting, every barrel of fuel is produced with 2 barrels of crude oil.

1 barrel crude oil = produce 46% fuel (or half of crude oil), therefore
2 barrel crude oil = approximately 1 barrel fuel
In other words, each time we sell 2 barrels of crude oil, equivalently we will buy back 1 barrel of fuel.

Financially,
Malaysia sell 2 barrel crude oil @ USD 130/barrel = USD 260 = RM 858
then, Malaysia will buy back fuel @ USD 134/barrel = RM 442/barrel
Thus, Malaysia earn net extra USD 126 = RM 416 for each 2 barrel of crude sold/exported vs imported 1 barrel of fuel !!! (USD 260-134 = USD 126 = RM416)

So where this extra USD 126/barrel income is channeled to by Malaysian Govt???????? ?

Another analysis:

1 barrel crude oil = 159 liters.
46-47% of a barrel of crude oil = fuel that we use in our vehicles.
46% of 159 = 73.14 liters.
@ RM 2.70/liter x 73.14 liter = RM197.48 of fuel per barrel of crude oil. This is only 46% of the barrel, mind you. Using RM 3.30 = USD 1, we get that a barrel of crude oil produces USD 59.84 worth of petrol fuel (46% of 1barrel).
USD 59.84 of USD 130/barrel turns out to be 46% of a barrel as well.

Another 54% = bitumen, kerosene, and natural gases and so many more.
And this makes a balance of USD 70.16 that has not been accounted for.

So this is where I got curious. Where is the subsidy if we are paying 46% of the price of a barrel of crude oil when the production of petrol/barrel of crude oil is still only 46%?



PS: My previous post only points out that we (Malaysia) sell at lower price according to crude oil price only to buy at high price according to world market price.

Thursday, June 19, 2008

Did the Govt really subsidize our petrol?

While I was doing some rough calculation, I was wondering whether our Govt really did subsidize us RM0.30 per litre? When the crude oil price was about USD138 per litre, world market price was about USD178. And according to 2nd Finance Minister Tan Sri Nor Mohamed Yakcop (sources http://www.bernama.com/bernama/v3/bm/news_business.php?id=339088), Malaysia should adjust the price to RM3.15 with 30cents subsidy, which means the market price is RM3.45.

Do some simple calculation
3.45/178 = 0.01938

0.01938 * 154.50 = RM3.oo per litre
(USD 154.50 = world market price at the time fuel price increase in Malaysia - 5th June 2008)
Crude oil price on the 5th June 2008 is USD135

USD154.50 - USD 135 = USD 19.40
USD 19.40 = RM 61.89 (if USD exchange rate with RM is 3.19)

RM61.89 / 158.987 = 0.39
(1 barrel = 158.987 Litre
source: http://en.wikipedia.org/wiki/Barrel#Oil_barrel)

RM3 - RM0.39 = Rm2.61
Rm2.70 - RM2.61 - RM0.09


RM3 is the extra that we pay if we go according to world market price, so with Rm2.70, it seems that the government is subsidizing us. But if we look at the crude oil price index, the price is actually RM2.61. I would assume world market price is price with tax, etc. The situation might sounds a little bit confusing, but from here we can see that we at least paying RM0.09 per litre as tax.

My opinion is the government does not subsidize us, but reduce our petrol tax by RM0.30 per litre.

Monday, June 9, 2008

Changing Lifestyle

The recent hike in petrol price put me in a difficult situation. First, I need to top up additional RM30-60 monthly for petrol. Then to be on the safe side, I should increase my food expenses to about RM20-30 also. That comes to about RM100 in total. Then it comes to my mind that if I were to change my lifestyle, will my previous financial goal or target achievable? Well, yes and no. Yes in the sense that if I totally change my lifestyle to no entertainment, no yum char session, no this and no that, then I have 90% confident that my current budget still ok. No, if and only if my forecast is not so good, meaning everything will increase exponentially. Nevertheless, the decision is for me to change my lifestyle so that every thing that I planned out early this year will remain status quo. At the same time, will try to see whether I can get additional income from other source.

A lot of us have complaining since petrol price hike. But, my suggestion still is to change our lifestyle before further increase. By changing our lifestyle gradually, we can in fact adapt to situation. Do not let the situation deter us from achieving our target. Below is the list of things that I can think of to cope with the current situation:-
  • Buy in bulk - if you do not need to use so much, share with others. By buying in bulk, you can get at lower price and at the same time not everyone need to go groceries with you.
  • Reduce the entertainment or yum char spending- I mention here reduce, not totally no. Why? Because "all works and no play makes Jack a dull boy". And some entertainment need not use money like jogging around the housing area, company teambuilding etc. Who knows, socializing might earn you extra income, especially if you are in the sales/marketing field. LOL!
  • Drive at a constant speed - this I believe was mention here and there, so I think no need to further elaborate.
  • Eat in pantry or cafe - drive less, eventually will save more.
Well, that's all I could think of at the moment. If I can think of anymore, I will post it. So, stay tune. :)

Thursday, June 5, 2008

Still on the petrol price hike again??

Just now, I read about MALAYsian dilemma that my brother wrote. In fact, I find that what he wrote was actually true. The Malaysian dilemma is definitely POVERTY. Realistic speaking, currently there is only one way that Malaysia, as a whole nation will go, which is NOWHERE. I keep asking myself, "Am I being a bit pessimist about the outlook on the economy in Malaysia?" I do not think so. Just yesterday after the announcement of petrol hike, we can really see how desperate Malaysian to go fill their tanks with petrol. Jam everywhere near petrol station, even at area where I am staying. This morning, there were even protest in Ipoh and KL. If I remember correctly, this has never happened in Malaysia before. The recent raise is the steepest, I believe. And more is to come. News circulated that the Govt want to let the price to float according to world price. But, after having a deep thought, I realized it might be a good thing to let the fuel price float according to the market price, yet we as Malaysian will get at least 30 cents subsidy. In fact I would like to see the face of those who brought this up when the global crude oil price decrease. The only thing that I worry now is that the Govt might change their mind and then fix the oil price again when the global crude oil price decrease. If our Govt keep their word and let the petrol price float, then it might be a good news for most of us after all as I always believe this......"What goes up must come down and vice versa."
Looking at the chart, we can believe that the fuel price will come down. It is just the matter of time. We will see how. In the meantime, we will just endure and be as prudent as possible. :)

Regular gasoline price from '72 to 2008



Crude Oil Price from '47-May 2008

Wednesday, June 4, 2008

Inflation!! What can we do about it??

When I was busy at the production, the Malaysian Prime Minister suddenly announced an increase of petrol price to about 50%. The increase come as a surprise to me and most of my colleagues. Most of the people anticipating increase about 100%, but not so soon. As soon as I got the news from a colleague, I quickly settle everything in the line and quickly leave office and go for a short pit-stop at one of the station. It's definitely a bad day for me as I only know about the news after office hour which could mean one thing, jam at all the petrol station. I guess it correctly but I do not care anymore. I just cut queue and manage to get everything done by a while. The bad thing about the pit stop is that I manage to that I did not manage to refuel full tank using my credit card. Another thing is that I bring very few cash, thus I can refuel RM24, which will translate into about RM10 savings. It is still ok for me. I'm posting not because of what I have gone through. I believe what I have gone through will be the same for most of the Malaysian. INFLATION. With the HIKE of petrol price, I believe will be a start of new chapter, could most likely mean nightmare for most Malaysian. It is a known fact that the public transportation in Malaysia is the "best" that most Malaysian needed to purchase a private vehicle just to go work and go from a place to another. Without own vehicle, the only transportation that most Malaysian can rely is by walking or cycling. Ok. Enough of the rant. What we will be seeing soon is inflation hike will take place. The inflation will be so severe that most of us will have to endure until we can think of a better way to overcome it. Think, increase at about 50% petrol price, logistic will 100% increase (we do not know how much it will increase, of course), thus the chain of reaction will go all the way and pass all the burden to consumer. In the end, it will be the consumer to suffer. The inflation statistic that will soon be released by the authority will definitely be a far cry from what the consumers are experiencing. Imagine, without the hike of petrol price, consumers in Malaysia are in fact facing about 2 figure inflation, but the official released was about 3%, which IMO, is bull shit. Let's take some example to prove the point. Almost every year, we can see about RM0.50 increase in food like economy rice etc. Let say the previous priced at about RM2, RM0.50 will translate into 25% of increase. Then we talk about Gardenia bread. Last time was about RM1.90 but if I'm not wrong, already increased about 25%. What else we want to get the example from? I still remember I used to eat at those old kopitiam having to spend less than RM5. But if you ask me now, I will definitely say additional RM5. I cannot blame the business operator, they are not doing for charity, but with everything going up and RM is becoming smaller and insignificant, they have no choice but to increase the price accordingly. Inflation is getting from bad to worse daily. Our purchasing power becoming from low to lower and end up we hardly survive. No wonder my dad told me that a lot of employees rather spend all the money than to save the money in the bank. Why? Because our inflation rate is so high that the authority do not want to admit and our bank fixed deposit is so low that whenever you save money, meaning you are losing the value of the money daily. So what's the point? A lot of people will think about that. The BIG question is again "What we can do about inflation??". Well, I do not know. I might post up something regarding this in the future. Well, till then, I will try to contain the situation so that it does not seems so bad.