Wednesday, May 25, 2011

Petronas and petrol prices

I received this e-mail (see below) today and it is purportedly about how consumers can force Petronas to lower the price of petrol by boycotting it.


Want petrol prices to come down?


We need to take some intelligent, united action. The oil companies just laughed at last year’s action because they knew we would not continue to 'hurt' ourselves by refusing to buy petrol. It was more of an inconvenience to us than it was a problem for them. BUT whoever thought of this idea, has come up with a plan that can really work. Please read on and join with us!


By now, you're probably thinking petrol priced at about $1.50 is cheap. It is currently $2.15 for regular unleaded.


Now that the oil companies and the OPEC nations have conditioned us to think that the cost of a liter of gas is CHEAP at $1.50, we need to take aggressive action to teach them that BUYERS control the marketplace...not sellers.


With the price of gasoline going up more each day, we consumers need to take action.


The only way we are going to see the price of petrol come down is if we hit someone in the pocketbook by not purchasing their petrol! And, we can do that WITHOUT hurting ourselves.


How? Since we all rely on our cars, we can't just stop buying petrol.


But we CAN have an impact on petrol prices if we all act together to force a price war.


Here's the idea: For the rest of this year, DON'T purchase ANY petrol from PETRONAS
the biggest price-up driver company.


If they are not selling any petrol, they will be inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit.


But to have an impact, we need to reach literally millions of Petrol buyers. It's SO simple! Now, don't wimp out on me at this point...keep reading and I'll explain how simple it is to reach millions and even BILLIONS of people!!


I am sending this note to 20 people. If each of you sends it on to at least twenty more that's (20 x 20 = 400) ...... And those 400 send it to at least twenty more (400 x 20 = 8000 .... and so on, by the time the message reaches the fifth group of people, we will have reached over SIXTY FOUR MILLION consumers!!!!!
20x20 = 400 400x20 = 8,000 8,000x20 = 160,000 160,000x20 = 3,200,000 3,200,000x20 = 64,000,000 64,000,000x20 = 12,800,000,000 That's 12.80 Billion people folks, who will have been contacted!!!!!


Unbelievable?? Do the math and see for yourself! Again, all you have to do is send this to 20 people. That's all!
I'll bet you didn't think we had that much potential, did you! Acting together we can make a difference..


If this message makes sense to you, then please pass it on. THEY will LOWER THEIR PRICES TO BELOW THE $1.50 RANGE AND KEEP THEM DOWN. THIS CAN REALLY WORK.


It’s simple – send the message along to others and choose to not buy petrol from Petronas. LET'S DO IT ! ! ! More power to you friend.


It all sounds attractive since consumers are empowered to change things for the better - in this case by forcing Petronas to lower the pump price of petrol.


But if you were to examine it logically and intelligently, it is flawed.


The author claims that if consumers were to stop buying petrol from Petronas it would be forced to lower its price.


However, consumers would still be pumping RON 95 petrol at the other petrol stations run by Shell, BHP or Esso/Mobil at the subsidised price.


Even if all Petronas stations sell zero litre of RON 95 petrol due to the purported boycott, Petronas would not suffer any loss because the station owners would have paid for the tanker-loads of oil. The station owners would be the ones who would bear the losses.


Even if Petronas stations sell zero litre of petrol, the excess capacity at Petronas tanks would easily be distributed to Shell, BHP or Esso/Mobil.


Bear in mind that even if the purported boycott takes place, there is no decrease in total demand because every motorist will still be pumping petrol - only not at Petronas stations. 


Shell, BHP and Esso/Mobil stations would enjoy higher turnover, but the total demand would remain the same.


"...by the time the message reaches the fifth group of people, we will have reached over SIXTY FOUR MILLION consumers!!!!!"


The author should get his/her facts right. Malaysia has perhaps 27.4 million people. Why is it necessary to reach 64 million consumers to boycott Petronas?


"That's 12.80 Billion people folks, who will have been contacted!!!!!"


The world's population is perhaps 6.92 billion. How does one contact the non-existent 5.88 billion folks?


Coming back to the price of petrol in Malaysia. The pump price of RON 95 petrol in Malaysia is subsidised by the Government and it is fixed according to a pricing mechanism which is based on the world prices of petroleum and the exchange rate of the US dollar.


The world prices of petroleum and the exchange rate of the US dollar are beyond the control of the Malaysian Government - or the government of any other country for that matter.


If the world price of Brent Crude Oil shoots up to US$150, is it the fault of the Malaysian Government? If the pump price of RON 95 at Malaysia petrol stations has to be raised because the world crude oil price shot up, is it the fault of the Malaysian Government?


If the author of the e-mail were to dig deeper, he/she would find out the world prices of crude oil are determined by the markets based on supply and demand factors - and speculation. Perhaps speculators influence the price fluctuations more these days.


And who are the speculators? They are the usual culprits - the fund managers of Goldman Sachs and other investment banks, the hedge funds, commodity funds and billionaire investors.


They are the ones who make billions of bucks for their rich investors (and the fund managers still get millions of dollars in bonuses).


And who are the losers? The billions (definitely not 12.8 billion) of consumers/motorists around the world and it's not the fault of the governments of the countries they live in.


Crude oil producers also make plenty of money when crude oil prices shoot up in world markets. These are mostly in the Middle-East.


However, Malaysia is still a net exporter of crude oil and Petronas will make lots of money when world prices of crude are high. And the profits end up in the Government's coffers.


So boycotting Petronas petrol stations will not force the pump price of RON95 to come down and it will also not affect Petronas financially.


The entire argument posited in the e-mail is flawed. 


If this message makes sense to you, then please pass it on.


This message actually makes no sense. People who have received it should just delete it.






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