Friday, March 07, 2008
posted by PabloPabla at 1:46 pm

So, the self-proclaimed rising star in UMNO has now got his own Laman Web Khairy at www rembau net. From one look, this web site looks very much like those of Obama's and Clinton's. According to Khairy, this web site is for him to tell the people what Khairy stands for and what his ideas are.

There is a streaming video in the site which shows Khairy rebutting Anwar Ibrahim's ceramah speech - on the Petronas petrol subsidy issue (hear what SEO expert Lilian has to say about the irritating streaming video on Laman Web Khairy). I was curious and I watched the video. Oh by the way, there is no way for you to turn it off. It comes on automatically. It's typical of shoving it in your face without giving you a chance to choose whether to watch and listen or not.

Now, please follow the following part of this post carefully.

The video takes a part of Anwar's ceramah about how he managed to maintain the price of petrol at RM1.10 per litre during his tenure as the Finance Minister from 1991 to 1998 and that after his tenure / sacking, the prices spiraled upwards till today at RM1.92 per litre - an increase of 82 cents.

In rebuttal, Khairy said that during those days, the price of crude oil was around USD 14 to USD20 per barrel and therefore, Anwar could afford to keep the prices of petrol low at RM1.10. Even a kid knows that - he says. However, the government could not afford to do so now because price of crude oil is now around USD100 per barrel. Therefore, we need to increase the price.

Initially, I was impressed with Khairy's eloquence but when I analysed his rebuttal, I realised something. Those days (Anwar's tenure), Petronas was selling crude oil between USD14 to USD20 per barrel and therefore, it makes a profit based on that price. Based on the "little" profit made from selling crude oil between USD14 to USD20 per barrel, Anwar kept the petrol price at RM1.10 per litre. Today, Petronas sells at USD100 per barrel and makes their profit from there. Does this mean then that the higher the price per barrel, the lesser the profit to Petronas and consequently, the higher the cost of petrol per litre? I am no mathematician and neither am I a financial analyst but surely, if the price per barrel has increased, likewise will be the profit and therefore, the price of petrol could still be kept at the lower price. If Anwar could keep the price of petrol at RM1.10 per litre when Petronas could only sell at USD20 per barrel at the max, why can't the price of petrol per litre be kept at RM1.10 when Petronas is now selling at USD100 per barrel?

Does it mean that even a small kid could figure things out better than me? Or is this meant to hoodwink the public with his oratory skills?



At 3:27 pm, Blogger Walski69

Good observation... There is one other possibility, however: that the price of crude Malaysia sells is fixed (via long-term contracts) to a certain level, way below the current market price.

Not that Petronas would've been foolish enough (I hope), but bearing in mind that the mean price for crude was around USD 25 per barrel 15 years or so ago, then dipped down to around USD 12, there is that possibility the contract price could have been fixed to protect a price drop, but without anticipating a price sky-rocket to what it is today.

This is mere supposition, by the way - I would truly hope we're selling our crude (high quality, low sulphur) at market prices...


At 4:57 pm, Blogger Bernado

Good question pablo. And it looks like the price RM1.10 could be maintained if Petronas had all that much profit at USD100 per barrel.
But as mentioned by Walski, Petronas could have signed long terms futures contracts. And he is probably right.
Because from what i hear from the insiders of Petronas, they hv been stupid enough to signed very long term contracts when the petrol price were far far lower than USD 60. So. you see how come they are claiming they are subsidizing.


At 4:56 am, Blogger gangeticus

Is it possible to know to whom these contracts were given out to? I smell a rat!

Or am I just dumb?