Crude oil types by country (Source: US Energy Information Administration)
The oil market has long been a global concern, since petrol can be considered the lifeblood of trade. Without oil, car, planes, trucks and any other auto vehicles simple would not be able to run. If you’re thinking of electric cars, then do consider how that electricity is produced.
Even with the most recent drop in petrol and diesel prices that have seemed to come along with the global slump in crude oil prices, many Malaysians have been wondering about the cost since we are an oil producing county. The almost 50% drop in global oil price has prompted many to wonder: Why aren’t we paying half price for petrol?
There’s no really simple answer for this, but perhaps it wouldn’t hurt to learn more about Malaysian crude oil.
Malaysian crude is sweet and light
Crude oils are measured according to two scales, density and grade, and Malaysian Tapis crude is both sweet and light. The high quality means that it can be refined into an unusually good proportion of high-value products such as petroleum (petrol).
As an idea of the price difference between standard crude and Malaysian Tapis crude, at the end of August 2014 Tapis was trading at US$122.96, as compared to standard Brent crude at US$115.38. So even if world oil prices are currently depressed, Malaysian crude is still being sold at a higher value than others.
Low sulphur content
Crude oil when processed can be refined into petrol, diesel, kerosene, liquefied petroleum gas and other useful products. Yet the crude oil itself comes in varying compositions. The composition of the oil that tells what percentages of refined products the oil can be made into, which naturally affects the price of that crude.
Sulphur is present in all crude oil, and present in small amounts in crude oil that is of a high grade such as Malaysian Tapis. Even post-refining, trace amounts of sulphur remain in finished products such as petrol. When the petrol is combusted in the engine, sulphur is converted to sulphur dioxide and emitted through your vehicle’s exhaust.
Sulphur is basically bad for many things, your engine as well as the environment, since it combusts to be emitted as carbon dioxide. In fact, having high Sulphur content petrol is so bad that in certain countries, car manufacturers are simply unable to introduce high-efficiency engines as there is a lack of suitable petrol.
For example, according to Cars Guide Australia, fuel savings in some European cars are 10% better than similar cars sold in Australia, simply because Australia’s high Sulphur content petrol damages new emission-reduction technology engine systems.
The long outlook
Malaysia not only has the bounty of black gold, but it also has the best black gold on the planet.
While we enjoy the benefits of this as one of our key economic contributors, keep in mind that the price of petrol at the pump simply cannot be pegged to the prices on the global oil market.
It is absolutely vital to remember that there must be a focus on longer term trend lines because of the short-term volatility of this commodity that’s seen on a daily or weekly basis.
Written in good faith and writer’s views are his own.