My CONTACT :

Damian S. L. Yeo & L. C. Goh (DSLY)
No. 2007, Lorong Sidang Omar, off Jalan Penghulu Abbas, Bukit Baru, Hang Tuah Jaya, 75100 Melaka

Tel : 06-2347011
& 06-2347012
Fax: 06-2347022

------------------------------------

Saturday, June 21, 2008

Oil Oh Oil...

An excellent piece of work by Humble Voice which I have cut and paste the whole works. Enjoy reading it and you will have at least a bird's eye view on how much oil money to the government. While reading it, I began to have curiosity in my mind as to "mana wang itu"

The Mystery of Our Vanishing Oil Money

When common folks talked about our oil revenues we usually think of Petronas and the government as being the same entity. That was my perception when I wrote my last article: The 56 billion ringgit questions, but little did I suspect that I would have to completely reconsider my understanding almost the moment I posted the article.

I posted the article on 3:45pm June 4, and moments later I received an SMS that petrol price is going to go up. I was about the chuck the SMS away until I logon to Malysiakini and confirmed that the news was true indeed.

I was shocked by the suddenness and quantum of the increase as Najib’s reassurance of no price hike was still fresh in memory, and Shahrir was only hinting of a price adjustment in August the day before. My first reaction was that Pak Lah has just hammered the last nail in his own coffin.

I am not an economist by any means, but I came from a poor family and I have been through the years where every cent counts. It was completely baffling to me why Pak Lah would make such a sharp increase in petrol prices while the whole country was still reeling from the pain of the recent hike in the prices of food and other essential items. The combined effects are going to cause so much hardship to so many people that I seriously doubt Pak Lah is going to survive the fallout of it. And it got me thinking hard...

The Mystery of Our Oil Money

Let’s get back to the mystery of our oil money. After many hours of research and considerations – I came to realize that the relationship between Petronas and the government is much more complicated that it looks on the surface. The two are not the same entity after all; and by some recent announcements I think there could even be open hostilities between them. Read:
One key understanding is that although Malaysia is a net exporter of crude oil, our products are of very high quality and are primarily for export while we consume lower grade oils that are mainly imported from the Middle East.

While the exploration, production and export our crude oil are handled almost exclusively by Petronas, the import side is a bit more complicated. The importing and retailing of petroleum products are carried out by companies like Shell, Exxon, Petronas, etc. These companies are mandated by the government to sell below cost, thus they are compensated for their losses by the Government in the form of subsidy.

Yes – our government does subsidize our petrol. But it also receives money from Petronas in the form of royalty, taxes and dividends. Petronas is reported to have contributed 52.3 billion ringgit to the government for the financial year ended March 2007.

Is that a fair contribution to the government? I will be eagerly waiting for Petronas supposedly full disclosure. I don’t give much hope that the full disclosure will reveal details like why some big shots get to live like a king with private jet and helicopters, but it should give some basis for some intelligent guess-analysis.

How much is the Government getting from Petronas?


The graph above shows Petronas contribution to the government over the past few years. I plotted it along with the yearly average crude oil price. The yearly contribution was obtained from Hassan Marican interview in RTM1 reported in Guang Ming Daily and the average oil price from EIA. As you can see Petronas contributions go up nicely with the price of crude oil, as most of us would expect.

What will be Petronas contribution for this year? That will be everybody’s guess. Would it be 70 billion? 80 billions? Whatever it is, it seems that Petronas is mightily reluctant to cough out its profits to the government.

How much is the petrol subsidy costing our government?

Our daily crude oil consumption is 501,000 barrels, or 183 million barrels per year. Each barrel is 158 liters, and typically yields 73.8 liters of petrol, diesel and other by products after refining (data from EIA).

Our yearly petroleum consumption is thus:
183 million barrels X 73.8 liters/barrels = 13.5 billion liters.

At the current crude oil price of 130 USD per barrel, the market price is RM 3 per liter for petrol (according to Shahrir).

Our government’s yearly subsidy on petroleum can be calculated as follows. For lack of data I will assume that the cost price of petrol and diesel is the same.

Before Price hike:
The average price of petrol and diesel =
(RM1.98 + RM1.52) /2 = RM 1.75

Subsidy per liter = RM 3 – RM 1.75 = RM 1.25
Total Subsidy = RM 1.25/liter X 13.5 billion liters = RM 16.9 billion

After Price hike:
Average price of petrol and diesel =
(RM 2.7 + RM 2.52) / 2 = RM 2.61
Subsidy per liter = RM 3 – RM 2.61 = RM 0.39
Total Subsidy = RM 0.39/liter X 13.5 billion liters = RM 4.0 billion


What do all these figures means?

Firstly, since Pak Lah took helm, Petronas has contributed RM 146.5 billion to the government. Petronas has been in operation since 1974 and contributed a total of RM 336 billion to the government. Pak Lah’s first 4 years in office received 43.6% of Petronas 35 years of total contributions. It is more than what Mahathir received in 20 years, inflation adjusted. And it does not even include this year’s contributions!

Is your reaction that of disbelieve? Are you wondering where have all these money gone to?

Mahathir is known for his opulence and extravagance and have created monsters like Twin Towers and F1 circuits to match his distorted ego. But what have Pak Lah done that is worthy of being mentioned? To give you a perspective, it costs RM 11 billion to build Putrajaya, and the order of RM 20 billion to build all our toll roads. Whatever happened to this mind boggling 147 billion ringgit? It seems to have just vanished in thin air. Something must be seriously wrong somewhere.

Now the 56 billions petrol subsidy quoted by Shahrir. My own calculations indicate that it should cost the government RM 16.9 billion. My calculations do not include subsidy for gas, but would it amounts to the RM 39 billions difference? Either my calculations are completely wrong or Shahrir is bullshitting. I would appreciate if somebody can verify my calculations.

My calculations show that with RM 52.3 billion contribution from Petronas the government should still be making a net profit of RM 30+ billions. And the recent price hike is going to bring extra RM 17 billions to Pak Lah’s coffer. Is it conscionable for the government to make such an obscene amount of money at the expense of such widespread suffering of the people?

I am shock beyond words by what I discovered today. The level of corruption and mismanagement by the Barisan Nasional government is way way beyond than my wildest imagination. It sickens and disgusts me to the point that I just want to cast the whole Barisan Nasional government to hell right away. Right now I will not hesitate for a moment to lend my support for Pakatan Rakyat to step in to take over the government.

Do I believe that Anwar is able to bring down the price of petrol and give Sabah and Sarawak 20% oil royalty? I have no doubt that he can, if he managed to gain back the control of the oil money. I do not agree with his oil policy, but that's a separate issue altogether. At least with Pakatan Rakyat there is hope that ordinary people like us is able to participate to bring about the right changes.

This is the time for us all to wake up. If the level of suffering and darkness of the current moment is not enough to wake you up, I don’t know what will.

Look who is suffering now? We all are. Does the 50 years of racial politics bring about the supremacy of any race? I hope our sad state of affairs is convincing enough to show us that racial politics can not work. It never will.

We have to forget about race, religion and other trivial differences and stand united as one. This is the time to exercise our collective power, our makal shakti, this is the only strength that we have to cast out the slime bag power mongers that are hell bent to destroy each other and bringing down the whole country with them.

1 comment:

mantra-indeeptots said...

Hi Yeo
Great to finally found another blogger from Melaka of the same thoughts.. Lets not be fooled by fools!

I have written same thoughts and would like to share some with you on the oil hike issue - POLITICIANS.. DONT JUST ASSUME.

I have added you in my link.