MORE LOSSES IN STORE: MALAYSIAN FUEL DEALERS IN A DILEMMA AFTER NEW GOVT PRICING MECHANISM

Following the introduction of weekly ceiling fuel pricing mechanism, coupled with the continuously falling retail prices — the fifth straight fall this week — many petrol dealers in the country are suffering losses, and they hope the government will do something to help them out of the current doldrums.

There are a total of 3,500 gas stations in the country, but since the government abolished fuel subsidies and implemented the weekly floating pricing policy, many of them begin to encounter difficulty in sustaining their businesses.

From what we know, since the monthly ceiling fuel pricing mechanism was introduced in 2014, some 30 to 40 petrol stations have wound up their businesses. With the implementation of weekly pricing, more are expected to go under. Some 80 petrol stations have already closed down during the last two years and the dealers are worried more will do so if fuel prices keep dropping.

Among the reasons for the closures are minimum wage scheme, rising energy cost, 1% credit card fee, low commissions and falling oil prices.

The falling fuel prices have forced dealers to sell their stock at below-cost rates. Generally, a petrol station will keep an inventory enough for ten days of supply. Under the weekly ceiling pricing system, there is no way for the dealers to finish the stock before the next announcement, especially for RON97 and diesel which are less marketable but are kept in relatively high stocks.

Petrol Dealers Association of Malaysia has predicted that some operators may have to bear at least RM3,000 to RM5,000 in weekly losses.

PDAM has urged the government to allow dealers to decide on their own how much fuel they want to purchase in accordance with their own inventories in a bid to avert the problem of overstocking. If fuel prices continue to fall, petrol station owners will suffer losses due to excessive stock.

Similarly, they will not benefit even though fuel prices go up, because consumers will rush to fill up their tanks before the new prices go into effect.

PDAM has proposed to emulate the practice in some countries whereby the government would inform the operators two days before publishing the new ceiling prices so that they can negotiate more favorable prices with their suppliers.

In addition, PDAM also hopes fuel suppliers will raise the commissions for petrol dealers. The current commissions are seven cents for each liter of diesel and 21.19 cents for each liter of petrol.

Under the weight of rising operating cost, some of the petrol stations have been unable to break even in their businesses, with net profit at a mere 1.2 cents for every liter. They hope the commission structure in place since 2008 can be reviewed as a result of rising operating cost.

Petrol dealers are not wholly against the weekly ceiling pricing mechanism, but they hope the price trends could be a little “healthier” and that weekly retail price fluctuation is kept within five cents so as to stabilize the market and moderate any gain or loss.

Of course, they also hope that the government will consult the operators before implementing any new measure in future.

– Mysinchew

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