Wednesday, October 15, 2014

RON97 price would be the same as RON95 price soon?

The recent hike in RON95 petrol price by another 20sen to RM2.30 is of course, least welcomed by all Malaysians. This is because it will not just affect driving cost but will cause prices of other essential goods to rise as well. Anyway, with anger subsiding and Malaysians starting to adjust to higher oil price, it is interesting to take a look at the world oil price currently.
 
 
 
The chart is interesting because on 9th September 2014, RON97 price was actually reduced by 10sen to RM2.75 from the last revision in June 2014. From the chart above, Brent Crude Oil price in June 2014 is about USD107/bbl and in September 2014, it has dropped to about USD103/bbl. As such, if a drop of USD4/bbl translates to 10sen reduction in RON97 price, based on the latest Brent Crude Oil price of about USD85/bbl, the reduction of USD18/bbl would translates to 45sen reduction in RON97 price? This would mean RON97 price would be RM2.30 and would be the SAME AS RON95!!!
 
Isn't that interesting? Not sure what would happen then and how would the government justify the increase in RON95 price or are we expecting a reduction in RON95 price in line with falling international crude oil prices?
 
Disclaimer: The above computations are based on simple assumptions. Of course, the price mechanism would be more complicated as it is based on a managed float mechanism (I don't know how that works though) but the assumptions that RON97 price should drop in line with dropping international crude oil price should hold.