There you go! When it was reported that the world crude oil price was expected to drop down in 2015, I was right to say on Dec 5 that it would be US$50 a barrel, and this had become a reality on Jan 7, 2015.
And the same for saying that the price for RON95 petrol should be sold at RM1.80-RM1.90 per litre in Malaysia, though the government only reduced the price to RM1.93 which is still overpriced. However, with the current price plunge for crudes, the government should be comfortable selling RON95 at RM1.60 per litre or less.
And, Malaysia being an oil producing nation, the government should honour the citizen’s right to entitlement to a profit share from gains from sales of the nation’s crude oil and its related petroleum products by continuing to pay a nominal sum given in the form of subsidies, then RON95 could be sold at less than RM1.60 per litre.
Yes, this crisis is due to on-going dips in crude oil prices and businesses globally and especially to no cuts on crude productions from Saudi Arabia and other major oil producing nations. As a result, this is clearly a situation of supplies exceed demands.
For your information, oil market analysts Dan Murtaugh said they (oil producers) were debating if oil will fall to US$50 a barrel in last December. Now this has become a reality and furthermore, it is hearsay by some quarters that prices could fall some more to about US$20 a barrel. Well, should this happen then it will create chaos in world economies and hardships for nations whose capital funds come out from selling crudes, refined oil and petrol products.
In fact, it was already a reality as crude oil was sold for US$49.69 a barrel in the Bakken Shale region in North Dakota on Nov 28, 2014, according to the marketing arm of Plains All American Pipeline.
It went up to US$50.44 a barrel on Dec 2, 2014. Also the Crude from Colorado’s Niobrara Shale was priced at US$54.55, according to Plains. Eagle Ford Crude cost US$63.25, and oil from Oklahoma Panhandle was US$58.25.
However, the latest news is that the London Brent oil price for a barrel of crude had already crashed down to US$49.99 on Wednesday, Jan 7, 2015 and at US$48 in the US.
A producer, Auers, reckons if crude oil prices continue to fall then it does not make sense to keep drilling. But producers ignored the consequences instead stepped up productions. Maybe it costs more to close the stopcock and taps to stop crudes ending up burning in the skies 24/7.
Well, in my earlier write-up on this topic about crude oil collapse, that Malaysia as a producer could reduce pump price down to RM1 a litre if they continue paying a subsidy for RON95, if not then sell it at RM1.80 per litre, in view of current weak global market for crudes.
To backtrack, as reported by Business Times on Dec 5, 2014, Brent Crude oil fell below US$69.32 a barrel on Thursday, Dec 4, 2014 after Saudi Arabia cut selling price for Asian and US buyers - after the Sept 22, 2014 meeting of the Organisation of Petrol Exporting Countries (Opec).
Apart from above, US Crude also fell to US$66.09 in early New York trade. And, furthermore Nigeria, an Opec member, has also lowered its oil price budget assumption to US$65 a barrel for 2015.
By the end of 2014, both US Crude and Brent have fallen for five straight months, oil’s largest losing streak since the 2008 financial crisis, said Energy Aspect’s analyst Amrita Sen.
Price to stabilise at around US$65.80?
Nevertheless, Brent is optimistic that prices will stabilise at around US$65.80 a barrel in the short term in 2015.
Though this is a good forecast but looking at current poor market for crudes; but, for now, oil producers are more concern about keeping one's market share than raising prices during a weak global market.
Sadly and a disappointment to consumers is why Opec did not advise its members to lower output despite there is an existing oversupply market, rather to monitor the situation.
So, it may be difficult for Brent to achieve the forecast of selling at US$82.50 a barrel in 2015, especially with Crude's benchmark North Sea Brent settled down at US$69.64 a barrel on Thursday, Dec 4, 2014.
The other US benchmark WTI (West Texas Intermediate) had forecasted for January 2015 to be US$66.50 a barrel and Brent to drop to US$69.26.
These forecasts were a disappointment because as of Wednesday Jan 7, 2015, Brent Crude had fallen to near US$49.99 a barrel while in the US it was traded at US$48.
The bottom line is that crude oil prices from Malaysia, too, will fall in line with falling global oil prices. This is bad for the country. Whatever, the current pump prices for RON95 and diesel sold in Malaysia are still overpriced despite the government reducing the price for RON95 on Jan 1, 2015.
The government is urged to reduce the prices for RON95 and diesel some more and also to do so immediately when prices for crudes become cheaper by the day, as all petrol stations nationwide are already equipped with Internet connections. So the pump prices can be changed or updated on a daily basis.
In the past when oil prices go up, the government, too, will up petrol prices so they should do likewise when crude oil prices kept falling, since late 2014, that is, to reduce our pump prices some more.
LAU BING is a community activist and writer in Subang Jaya.
