petrol price drop dealer disagree 2019 jan

The Petroleum Dealers Association of Malaysia (PDAM) does not agree with the weekly fuel price float mechanism as dealers are often left shortchanged whenever there is fluctuation in fuel prices.

Its president, Datuk Khairul Annuar Abdul Aziz, said PDAM members end up losing money when the price went down and the stock in their possession was bought at a higher price.

He said petrol kiosks normally had three to five days’ worth of fuel stock in their tanks.

“Every time the fuel price goes down, oil companies wait until the price goes up to deliver fresh supply to us.

“We have underground stock of up to five days. If the fuel price drops, we will get (a lower) profit margin or even incur losses for that week,” he said.

To overcome the problem, he suggested that the fuel mechanism be implemented on a consignment basis.

“We want to sell fuel on behalf of oil companies. That means they own the fuel at our stations. We (retailers) will then become agents to sell, and we should be remunerated per litre based on sale of the fuel.”

He proposed that oil companies take over the full fuel ownership of stations, and dealers sell the fuel on their behalf.

“This is because dealers have limited financial capacity and fuel storage (tanks). We also don’t have any control over the fuel stock,” he said, noting that the proposal could provide a long-term solution to issues faced by retailers.

Khairul Annuar said PDAM was in negotiation with the government over dealers’ guaranteed profit margins.

He said PDAM was already in negotiation with some oil companies to work out a method to manage the issue of profit margins faced by retailers.

“We want the government to step in and work out how oil companies can ensure retailers have enough fuel stock for a minimum of two days every time the fuel price changes.

“This is to ensure we don’t run out of fuel when the price changes, especially when the price is expected to rise,” he said.

Bumiputera Petrol Dealers Association of Malaysia president Datuk Abu Samah Bachik said the government should standardise the fuel mechanism.

He said the association preferred the monthly fuel float mechanism or the consignment system as most retailers were already at the losing end whenever fuel prices dipped.

“It is unfair whenever we buy fuel at a higher price and end up selling it at a lower price. The consignment system will be better as it ensures long-term business sustainability.

“We (dealers) should also be given a percentage based on a commission rate of eight per cent of fuel prices. It should be changed from cent per litre to percentage.”

Source: New Straits Times