By G. Sharmila
Last Thursday, Deputy Finance Minister Johari Abdul Ghani said in a statement that the Petrol Dealers Association has urged the government to revise the fuel price on a weekly basis as the monthly managed float system could result in them incurring huge losses. Tiger thinks that a weekly review is bad news.
Tiger was happily sauntering along, doing some last-minute shopping on Christmas Eve in a local mall, when a news alert popped up on her phone. Apparently The Star had featured a statement by Deputy Finance Minister Johari Abdul Ghani supporting the Petrol Dealers Association’s suggestion for a weekly oil price review.
According to the news report, Johari said the petrol dealers complained to him that the current managed float system has adversely affected the volume of oil supply sent to them. The news report also quoted him saying that currently oil companies would distribute their supply to the petrol dealers based on their forecasts for oil prices.
Johari Abdul Ghani
“A lot of oil companies now use this opportunity by sending the petrol dealers oil supplies in large volume at the end of each month if they expect the price to fall the following month. If the fuel is expected to increase in the next month, they will then reduce the supply,” the paper quoted him as saying.
Johari reportedly said that if the matter is not managed properly, it could cause more than 3,200 petrol dealers such as Petronas, Shell, Caltex, Petron and BHPetrol to experience a loss of 70%. According to him, to avoid this problem, petrol dealers suggested that fuel prices be revised once a week with a maximum price difference of 5 sen. This way the price change would not be too different from the previous price.
“This will benefit the consumers, the petrol dealers and the oil companies regardless what the market price is,” he reportedly said. Currently, under the managed float system, retail prices are based on a monthly average world price of crude oil.
There are a couple of troubling things with a weekly oil price review and Tiger is going to lay the cards on the table, one by one.
Firstly, before suggesting a weekly oil price review, has the Petrol Dealers Association exhausted all other possible options of managing their oil supply? How is it that they hadn’t figured out a proper mechanism for doing this under the current managed float system? Also, did the government not include the association’s input before implementing the current system? Surely this issue would have cropped up before. Was it just swept under the carpet, or did the association itself overlook something?
Secondly, a weekly review would create an outcry among locally owned businesses and foreign corporations based here who have already been accustomed to the monthly review under the managed float system.
This is because they would already have synced their business processes and systems to match the managed float system. Changing the monthly review of oil prices to a weekly review would incur them large, unnecessary expenses. Is the Petrol Dealers Association willing to compensate them for this change, heck is the government going to give local businesses subsidies to help ease their burden?
Tiger thinks not and this is why the government should reconsider third-party pleas before implementing any drastic change to the managed float regime. The last thing businesses (and the rakyat) want are poorly thought out changes, similar to what happened with the flip-flopping surrounding the goods and services tax (GST) for mobile prepaids.
Although that issue ended up pacifying the rakyat (for now), this matter with oil prices may not be as easy to resolve because when costs increase for businesses, they will end up passing it to customers (ie the rakyat). This is really not a good idea given the rakyat is already feeling the burden of the GST and the rising cost of living.
Therefore, changing the managed float system on a whim or to please a select few will not go down well with the rakyat. Tiger urges Johari and his peers to scrap any plan they have to switch to a weekly oil price review for the sake of the people.
GRRRRR!!!
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