Thursday 2015-12-10

This appears to not make any sense:

The prime minister first flagged the possible deterioration in his October budget speech, when he said earnings from oil-related sources were 62 billion ringgit when crude averaged \$100 a barrel, and that it would fall to 31.7 billion ringgit next year. ... Brent rose 0.8 percent to \$41.07 a barrel in Asia on Tuesday, less than the \$48 assumption in Najibâ€™s budget for next year.

We know that the amount and average cost of oil produced by national oil companies doesn't change drastically from year to year. Converting the above statements into equations:

( 48 USD/bbl - Cost USD/bbl) x Production = 30 B MYR ( 100 USD/bbl - Cost USD/bbl) x Production = 60 B MYR Since 60 B = 2 x 30 B, we can equate the two equations: 2 x ( 48 USD/bbl - Cost USD/bbl) x Production = ( 100 USD/bbl - Cost USD/bbl) x Production Divide both by Production, and we get: 2 x ( 48 USD/bbl - Cost USD/bbl) = ( 100 USD/bbl - Cost USD/bbl) After expanding the left side: 96 USD/bbl - (2 x Cost) USD/bbl = 100 USD/bbl - Cost USD/bbl Solving for Cost, we get -4 USD/bbl

Meanwhile, the average cost (depreciation included) per bbl is estimated to be ~50 (USD from 2007)/bbl for Malaysia.