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'More Refineries May Not End Petrol Price Woes'

Posted on: Sunday, 16 October 2005, 21:00 CDT

By KAMARUL YUNUS

BUILDING more oil refineries in the country may not be the answer to the

problem of rising petrol prices at pump stations, industry officials said.

An official with a petroleum company who requested anonymity said this

is because of the co-existence and relationship between crude oil and

petroleum-based products like petrol.

"As long as the price of crude oil is high, the price of

petroleum-based products will follow suit.

"So, I am not sure that this (building more refineries) would solve the

problem. Crude oil is the material used to produce those products," the

official told Business Times.

The official was asked to comment on suggestions that Malaysia should

build more refineries to cope with the current rising price of crude oil

and petrol as well as new oil and gas discoveries in the country.

However, the official did not rule out that the refineries can be

expanded but said it will depend on future needs of fuel in the country.

"The economics of having refineries also depend on the state of

technology applied," the official said.

An industry observer concurred that having more refineries will not

necessarily solve the problem of escalating price of fuel.

"Actually there is not much difference in price of imported fuel and

those processed in the country.

"The price of the products are determined by the global market. This

(refining) is not only done here but all over the world.

"It is not a question of inadequacy of capacity or demand for fuels.

There is currently enough capacity and demand in the region. it is a

complicated issue," the observer said, adding that Malaysia has to look

at the long-term prospects of building many refineries.

"What will happen in the next several years if there is not much demand

for the fuel?" the observer questioned.

However, RAM Consultancy Services managing director and chief economist

Dr Yeah Kim Leng still thinks that there is this prospect of building

more refineries.

"It can be expanded but will depend on the capacity and demand for the

fuel," he said.

Source: Business Times; Kuala Lumpur

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