Petrol dealers get commission rise as float system returns

Govt agree to increase petrol dealers’ margin to 15 sen per litre for RON95 and 10 sen per litre for diesel


The government reintroduced the weekly price-determining float system last Friday, slashed the cost of oil at the fuel pump and increased the operators’ commissions for the first time in 10 years as Putrajaya forged a compromise between users benefits and business demand.

Following last Friday’s decision, the retail prices of RON95 and diesel fell 27 sen and 14 sen respectively.

The prices of petrol are set at RM2.23 per litre for RON97 and RM1.93 (RON95), while the diesel price at RM2.04 for the Jan 5-11 period. It will be re-adjusted under an automated pricing mechanism formula to tally global crude prices.

The former weekly petrol pump mechanism was critisised by many dealers for being lopsided and cost losses.

The move to reintroduce the weekly price calculation was forced onto the government after oil prices tumbled in recent weeks, heightening calls from the consumers to expedite the introduction of a faster method to calculate fuel prices.

Although consumers enjoy cheaper prices at the pump, petrol dealers as a whole would incur losses of about RM40 million based on the stocks they have. Operators pay in full for each consignment upon delivery at a specific cost and when the prices tumbled, their profits would be eroded.

Finance Minister Lim Guan Eng said the new retail prices also took into consideration the higher commission granted to pump station operators as approved by the Cabinet on Jan 2.

The government agreed to increase petrol station operators’ margin by an additional 2.81 sen to 15 sen per litre for RON95 and an additional three sen to 10 sen per litre for diesel — marking the first profit margin hike in over a decade.

Despite welcoming the revision, the Petrol Dealers Association of Malaysia president Datuk Khairul Annuar Abdul Aziz maintained the need for further measures to abate the risk of the weekly oil price fluctuation onto their businesses.

In recent years, petrol station operators have struggled to cope with thinning margins as expenses on utilities and foreign labour grow. Many rely on their convenience store sales to ease the losses.

Khairul Annuar expects the challenges to remain, with the first weekly fuel price drop estimated to bring a total loss of up to RM40 million on dealers’ end. One petrol station operator who spoke to The Malaysian Reserve on the condition of anonymity has valued his loss at about RM13,485 with a balance stock of over 54,000 litres.

Consumer groups have lauded the move with some describing it as a “New Year’s gift”.

Federation of Malaysians Consumers Associations secretary general Datuk Paul Selvaraj said the weekly revisions would give immediate benefits to consumers and have a positive impact on the national economy.

The win-win formula will see the rise in retail fuel prices capped at RM2.20 per litre for RON95 and RM2.18 for diesel — much to the delight of the general public.

The government is expected to maintain the price caps until it implements the targeted RON95 petrol subsidy in the second half of this year.

A total of RM2 billion has been allocated for this new initiative.