Petrol dealers could close stations due to weak fuel prices and MCO – PDAM repeats need for price floors

According to the Petrol Dealers Association of Malaysia (PDAM), many petrol dealers may have to cease their operations because of the financial stresses arising from weak fuel prices, as well as weaker traffic due to the government’s movement control order (MCO).

In a report by Bernama, PDAM president Datuk Khairul Annuar Abdul Aziz revealed that petrol dealers have recorded a 70% reduction in sales of fuel products. “Many will have to close soon, there is no more money. It will depend on how much reserve they have. We are not allowed to take unpaid leave; our electricity is still at the same rate. We did not get the 15% rebate, but we are badly affected. It’s going to be tough,” he added.

The 15% rebate mentioned refers to a discount provided by Tenaga Nasional to six selected business sectors directly affected by the Covid-19 pandemic, namely hotel operators, travel and tourism agencies, shopping complexes, convention centres, theme parks, and local airlines offices. The discount was first announced on February 27, and will be given for up to six months from April 1 to September 30.

Last week’s fuel price update saw RON 95 be priced at RM1.44 per litre – a 38 sen drop – while RON 97 went down by 36 sen to RM1.74 per litre. Meanwhile, the price of Euro 2M diesel was also reduced by 12 sen to RM1.75 per litre, with Euro 5 retailing at RM1.85 per litre. The significant price reductions are a result of falling crude oil prices due to an “oil war” among oil-producing countries.

Khairul Annuar said petrol dealers typically have a working capital of only RM200,000 and given the current situation, this could be depleted quickly, which could lead to some not having enough savings to buy fuel. “Everyday we sell. We bought at the (previous) price of RM1.82 (per litre), and then (the pump) price goes down to RM1.44, that’s a 38 sen reduction for RON 95. By a lucky coincidence, sales had been very low when we were selling fuel at a 38 sen loss for a week or so,” he said.

“It’s been three weeks of declining prices, and we have already lost RM40,000 this week, money that’s part of our working capital. At the end of the month we have to pay workers’ wages, and electricity bills of between RM30,000 and RM70,000 (depending on size of petrol station), which is also part of our working capital,” he continued.

The PDAM president repeated the need for price floors to be established for fuel and added that a stabilisation fund is also required to help petrol dealers. “That is what we have been requesting since last week, but they are afraid the people will be angry. I think, one, you should not move that much, and two, the prices are unprecedentedly low now. I am not sure if they were any lower it would be better for the rakyat,” he stated.

“It is better to put a floor (price). Anything extra that the government collects in the stabilisation fund can go towards a subsidy (scheme) when the prices go above the ceiling. A stabilisation fund is a good mechanism,” he explained.

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