Analysis and Calculation of Petrol Price in Malaysia

This project study and analysis the formula used in estimation of new petrol price for next month 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 formula for our managed float system can be simplified with four major variables as below:

New Petrol Price = ( a x CS  +  b x CL  +  c x FU ) x UM  +  d x FM + e x SD

Notes:

a, b, c, d, e = variables, the value is different for RON95, RON97 and diesel

CS = Short term crude oil price, ranged from 3 dayss to 1 month, in USD unit

CL = Long term crude oil price, ranged from 1 month to 6 month, in USD unit

FM = Fix Cost, a cost that unlikely to change in short term, like transportation cost, production and refinery cost, profit/ cost in petrol station, constant tax, in Ringgit unit

FU = similar as FM, but this cost is incurred in other country, in USD unit

UM = average of USD/ MYR, conversion of USD into Ringgit

SD = Surplus or Deficit in Reserve. 

Explanation:

These four variables have different weight, with CS as a major contributor, the CL and FM the secondary, and FU is the least concern. The composition of the variables also depends on the type of fuel, namely RON95, RON97 and diesel. As an example, RON97 has a higher FM/UM cost compared to RON95 due to higher operating cost in processing plant. Diesel has a lower CL compared to RON95, as diesel has more commercial customer and following the market fluctuation while RON95 is depends on the inventory control and tends to be less fluctuation. For easier understanding, the Ringgit conversion, UM, is represented by one month average as the Ringgit is less volatile compared to Crude Oil. Moreover, the Long term contract/ inventory of Crude Oil is mostly holding in USD currency.

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 end of month), the reserve will be positive and the new petrol price announce in future will be lower.

The data used in calculation were derived mainly from CME NYMEX WTI Crude Oil Futures (CL) 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, which adjusted accordingly on the traded month volume. This is important due to the crude price tends to be volatile when approaching month-end as the volume shrinking.

Next Month Prediction Price for RON95

Next Month Prediction Price for RON97

Next Month Prediction Price for Diesel

Share