Analysis and Calculation of Petrol Price in Malaysia

This project study and analysis the formula used in estimation of new petrol price for next week in Malaysia. The study is important for petrol consumer to decide the timing of petrol purchase. While the study may only save the customer for few Ringgits in each pumping, it is a huge concern for petrol station owner, which a different of 10sen may wipe out their entire month of profit if they forecast wrongly.

After study the Malaysia monthly petrol historical price for last two years, the prediction is more accurately by using the Premium/ Refined oil price, data from MOPS (Means of Platts Singapore), compared to data of crude unrefined oil. Formula for our managed float system can be simplified with four major variables as below:

New Petrol Price =  PS  x UM  +   FM +  SD

Notes:

PS = Refined oil price, 1 month, in USD unit.

UM = average of USD/ MYR, conversion of USD into Ringgit, ranged from 2 month to 4 month

FM = Fixed Cost, usually around 22 to 55 sen. The value of FM is unlikely to change in short term, it consist of components such as operation/  transportation cost, profit margin in petrol station, constant tax, in Ringgit unit. More info below. 

SD = Surplus or Deficit in Reserve. 

Explanation:

Value for PS is depends on the type of fuel, namely RON95, RON97 and diesel. The value is extracted from MOGAS95, MOGAS97 and GASOIL derivative products. As this derivative products is in barrel unit, the value had to divided by 159, as 1 barrel equal to 159 litre.

Goverment have a reserve fund for petrol subsidy. The petrol price tends to be higher if the reserve is in deficit. On the other hand, the price will be lower than actual if the reserve is in surplus situation. Therefore, if the actual crude oil price is lower than prediction (made on each Wednesday), the reserve will be positive and the new petrol price announce in future will tend to be lower. This reserve fund useful in filter out the ripples and avoid spike in pricing.

The data used in calculation were derived mainly from NYMEX Singapore Mogas Platts and BNM Statistic Exchange Rate (USD versus MYR). For higher accuracy, the crude price used in calculation was combination of spot, second and third month in the future price. This is important due to the oil price tends to be volatile when approaching month-end as the volume shrinking.

Many misunderstood that the pump price follows only the fluctuation of crude oil price, in fact government use Automatic Pricing Mechanism (APM) system and Means of Platts Singapore (MOPS) to calculate the pump price. MOPS price is affected by crude oil price, logictisc, refining and other costs. Note that crude oil price is just one of the several components that affects the MOPS price, although these two will usually move in the similar direction (ie up or down), but they won't be on the identical path, because MOPS were affected by other costs while crude oil is not. 

On top of that, let's not forget that government has the right to impose tax on petrol for up to 59 sen, and diesel for up to 40 sen. Although currently government do not tax both the petrol and diesel (except Ron97), but one should that they can impose tax on the petrol and diesel, if they want to, and this is not somethine that we can predict. 

Fixed margin components of petrol and diesel price

RM sen/liter RON95 Diesel
MOPS Average market rates market rates
Alpha 5 4
Operational Cost 9.54 9.54
Oil Companies' margin 5 2.25
Fuel retailers' margin 12.19 7
Total 31.73 22.75

Whereby

  • Alpha: difference in price between the MOPS wholesale price transacted by oil companies and refineries. 
  • Operational cost: transport and marketing costs were the same for both petrol and diesel.
  • Oil companies' margin: revenue margin for oil companies set by the government, all oil companies will have the same revenue margin. 
  • Fuel retailers' margin: what the operators of petrol stations earn for each liter of fuel sold. Same for all petrol station operators in the country.

On top of that, Ron97 is charging around 20sen of tax, while Ron95 and Diesel are not.

Next Month Prediction Price for RON95

Next Month Prediction Price for RON97

Next Month Prediction Price for Diesel

Share