Tai Zee Kin

Beyond The Echo Chamber

RON 95 – Calculate the price yourself!

RON 95 went up by 20 sen over 2017 Near Year celebration in Malaysia. Once again, the new RON 95 pricing shocked and suprised the whole nation, and created another round of rage-suprise frenzy in social media and whatsapp.

The feeling was pretty bad indeed. How human nature works, is when you don't mentally prepare for bad things before it happens, the bad feeling that comes along become significantly worse off when it finally hits. However, if one was to thoroughly prepare for all the bad things that are about to come before it happens, the perception becomes relatively bearable when it happens. How bearable will that be, is highly dependable on how prudent you are in overestimating your cost.

So to save yourself from another potential rounds of rage, suprises and heart attacks over fuel prices, It's best that you start picking up on how to calculate RON 95 Prices. you can do so by the end of every month to predict the actual pricing.

NOW, LETS LEARN HOW TO CALCULATE RON 95 PRICE!

1.) Ingredients to the Price/Cost

images

Sardine Bun : You bought a Sardine bun from Giant supermarket this morning, for RM 1.60. The RM 1.60 you paid for include the cost of, among others, Floor, Sugar, Baking Soda, Sardine, Seasoning of Sardine, Onions, Salt, Oil, Preservatives, Margin of the retailer, Transportation cost, Packaging etc. Each of these ingredients and element incurs certain amount of cost. If you want to know the detailed breakdown, you can always go to the manufacturer and retailer, befriend with their accountant, and ask for them to reveal their cost to you. Fortunately you dont have to befriend a retail oil company accountant to know your RON 95 pricing.

RON 95 PetrolYour litre of RON 95 include costing for the actual refined oil (based on MOPS pricing), alpha, operation cost, oil company margin, dealer's margin, and before 1st April 2015, Sales tax (Which is now abolished because RON 95 is not GST-taxable).

2.) How much is the cost of the individual item listed in RON 95 cost breakdown?

First we need to know, that these costings were done according to the Automatic Pricing Mechanism (APM) system implemented on 2nd April 1983. The Regulation implemented then in 1983, listed exactly how much these costings are, to the micro sen. or nano sen (whatever). Scroll down to the bottom of this post and refer to Appendix 1 if you want to read the actual APM document, released in 1983.

But they were all in words. So I made it easy for you by putting a table. Please do not share this table without my explicit permission because in the event I incurred any omission in this table, I do not want it to be mis-interpreted further. So here you go :-

APM calculation.png

So from this Table, you can see, that summing up point 2-5  you get a fixed cost of RM 0.32 (round up from RM 0.3173) per litre. IT MEANS that even if one day when Refined Fuel oil become FREE, you still have to pay RM 0.32 per litre for your RON 95.

IT's like, if one day FLOUR become free, you still have to pay for other cost of your Sardine bread too right? the sugar, packaging, transportation cost, retail shelf place etc.

So what you should have in your mind by now, is RON 95 Price is RM X (MOPS) + RM 0.3173

________________________________________________________________

skip to point 5.) if you want to continue on the calculation. Stay on point 3.) and 4.) to understand a little bit more about MOPS

_________________________________________________________________

3.) MOPS - Means of Platts Singapore  - Why is it called "Platts"? Story Telling Session

in 1909, Mr Warren C. PLATT (1883-1963) published the "National Petroluem News", and lateron in 1923 he published the Newsletter "PLATTS OILGRAM" which was an influential reference for PETROLUEM PRICES.

The Company that Mr Warren C. PLATT formed to publish these Petroluem Prices, was McGraw-Hill, which lateron became S&P Global. the division/department within S&P Global that continues to publish commodities and energy prices, is now known as S&P Global Platts

So, in honour of Mr Platts, the Petroluem price circulation that he used to publish, is now named after him - PLATTS.

4.) What is the different between Pricing from Brent, West Texas, and Means of Platts?

Brent and West Texas are used to indicate CRUDE OIL price.

Means of Platts is used to indicate PREMIUM/REFINED OIL price. in our case, MOPS 95 for RON 95.

Think of Crude Oil, analogically, as your raw Chicken. The price of Raw Chicken, and cooked/treated chicken served on your plate in a restaurant is very different. Brent/WTI is used to measure the raw chicken price, while Means of Platts is used to measure the price of your Chicken Chop/ Chicken Maryland / KFC Spicy Dinner Plate. It is almost certain that the price of the latter is always higher than before.

So when you want to calculate the price of RON 95, which is refined for your car use, use the Means of Platts. They were used by most South East Asia country and also Australia.

However if your car runs on Crude unrefined oil, (maybe you have invented one in your garage. who knows?) then you can proceed to use Brent and WTI to calculate your RON 15 price. or RON 5. or RON8. i don't know the octane number for unrefined/Crude oil, or if there is any Octane number at all.

And if you are want understand how Platts calculate refined oil price, you can read them here.

5.) How do you calculate the MOPS cost in our Malaysia's RON 95?

First, you find out what is the current index of MOPs RON 95. I found one here, and you get something like this :-

mops-2

once you get this graph, you have to start to do some home work. If you remember, our price (APM) is adjusted every month instead of everyday, and the price of the coming month is based on the average index of MOPS Ron 95 (Mogas 95) of the current month. So you will have to get the index quote for the whole month, add them up, divide by 30 to get the "Average" MOPs Price. Whatever number you get for the month, would be your amount RM X for the next month's RON 95.

20170103_144522

mops3

IE, in the above graph, December's Average RON 95 MOGAS MOPS pricing will be the base RM X for January RON 95 price in Malaysia.

So to calculate January RON 95 Pricing, you find out the daily MOPS MOGAS 95 price, add them up and find the average. To ease your trouble, I've done that for you 

mops 4.jpg

Simple Excel work.

Cost per Barrel (USD)

So now, we have the average MOPS RON 95 cost per barrel for December 2016 : USD 66.553

Cost per Litre (MYR)

With that, lets first convert from barrel unit to Litre, which is what we use. The            Conversion ratio is, 1 barrel = 159 Litre . Also for December, the Exchange rate between USD and MYR was about USD 1 to MYR 4.49.

So, 159 litre of December RON 95, would cost you USD 66.553, or RM 298.923

and 1 litre of December RON 95, would cost you RM 1.87938 on MOPS alone.

6.) Adding up RM X (MOPS) and RM 0.32

now, you have managed to get hold of the MOPS pricing for december 2016 (RM 1.87938). So to calculate January 2017's RON 95 retail pricing in Malaysia, add up the MOPS average monthly price (RM 1.87938), and the abovementioned other costing (alpha, dealer/oil company margins, operation cost) of RM 0.32.

the Actual APM Retail price of RON 95 for January 2017 is around 

RM 2.19938 , or RM 2.20

currently, you are paying RM 2.10 for it because the Government "STILL" subsidize it. If not, based on APM, like what is adapted by most countries in the world, you would have to pay RM 2.20 instead.

Conclusion : be kind to your heart, and stop exposing it to shock and rage. Do some calculations and prepare for what is coming the next month ! You can predict the price and impress your friends by your prediction, because they are quite accurately reflected most of the time.

_________________________________________________________________APPENDIX 1

apm-pricing

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