Weekly Fuel Ceiling Price Mechanism

The Petrol Price in Malaysia is governed by the Ministry of Domestic Trade, Co-operatives and Consumerism (Kementerian Perdagangan Dalam Negeri, Koperasi dan Kepenggunaan; or KPDNKK). The weekly petrol price adjustment is implemented nationwide since March 2017.

Introduction

KPDNKK Minister, Datuk Hamzah Zainuddin has officially announced in March 2017 that the Weekly Fuel Ceiling Price will be introduced by the end of the same month. According to Datuk Hamzah, a new ceiling price will be announced on every Wednesday of the week and it will take effect at 12:00 am the following day, Thursday.

The retailers or the petrol station owners are then allowed to set their selling price individually at the same or lower than the announced prices. In some circumstances, they may offer a flash promotion, driving the motorists to their stations and be competitive with their rivals nearby. Consumers, however, will get the most benefits out of the competitions.

“The government is determining the fuel price to avoid it exceeding the correct market price. In reality, what second finance minister Datuk Seri Johari Abdul Ghani and I are doing, is to ensure the people know what had been determined by the Petroleum Dealers Association of Malaysia,” Hamzah told Bernama.

How does the Government calculate the ceiling price?

The factors of average cost of petroleum production versus the currency rate conversion of the week will be taken into considerations while determining the ceiling price of the week. The ministry will then factor in the other costs such as operation cost, transportation cost and retail profit margin before finalizing and announcing the new prices.

That is to say, the up and down trend of the weekly prices are reflective of the world oil prices and the overall impact to the local production base on multiple relevant factors.

No Discount Yet On Petrol Station

According to a news report by The Star Online on 31st of March 2017, petrol station operators are no longer allowed to offer discounts on fuel for now. In this online news report, Akhtar Sahari, Domestic Trade, Cooperatives and Consumerism Ministry corporate communications head, said

“Petrol station operators will not be allowed to offer discounts on fuel for the time being”

Furthermore, he also added that there is a possibility that these petrol station operators will be given permission again sometime in the future to offer promotions on fuel. However, for now, all petrol station operators need to follow the retail prices that are set by the Ministry.

He said that while the Ministry allows petrol station operators to give discounts, they are not allowed to give discounts right now until the new measures have been taken. According to Akhtar Sahari, he is unable to give a specific timeframe on when these new measures will be taken by the Ministry at this point in time.

In order to address the concerns voiced by some of the low volume petrol station operators, Akhtar Sahari said that the Ministry will come up with a proper guideline to address those concerns. He has also reminded all consumers to be cautious of smartphone apps that display the listings of fuel prices by saying that these listings can be inaccurate.

After screenshots of a smartphone app listing lower fuel prices went viral online, the Ministry responded by releasing an official statement to state that there was no price war between the petrol stations.

The Ministry also released an official statement declaring that all of the petrol stations must sell their fuel at retail prices and these retail prices must be set by the Malaysian Government.

Sometime early this month, Datuk Seri Hamzah Zainudin, Domestic Trade, Co-operatives and Consumerism Minister, stated that the petrol station operators have two choices to follow when it comes to selling the fuel at retail prices. They can either follow the ceiling price under the new system or offer lower fuel prices in order to promote their petrol stations. However, before doing any promotions, the petrol station operators require a prior approval from the Ministry.

Following that statement by Datuk Seri Hamzah Zainudin, the Petrol Dealers Association of Malaysia chipped in to voice out their concerns that small dealers in rural areas will find it difficult to sell their fuel on discounts.

Did the Weekly Fuel Ceiling Price Mechanism end after PH Won the General Elections?

The 7th Prime minister in Malaysia, Tun Dr Mahathir Mohamad has just finished a press conference where he was asked if there will be any changes in fuel prices for the upcoming week, as today is the first Wednesday since Pakatan Harapan (PH) won in the general elections. The answer is “No”.

“No increase or decrease, if the global oil prices go up, the government will subsidise,” Tun Dr Mahathir said.

There is no elaboration whether if the weekly price mechanism that has been in place since March 2017 will be scrapped, as most expect it to be.

This means that pump prices, which have been unchanged for seven straight weeks prior to this, will be maintained until further notice.

RON 95 petrol is currently priced at RM2.20 per litre and RON 97 at RM2.47 per litre. Euro 2M diesel is RM2.18 per litre while Euro 5 diesel goes for RM2.28 per litre. These prices will remain until further notice. The last time there was a change in fuel prices was during the fourth week of March 2018, which saw a 10 sen increase across all fuel types and grades.

The Return of Weekly Fuel Ceiling Price Mechanism in 2019

Finance Minister Lim Guan Eng today said retail prices of petroleum products in Malaysia will be set on a weekly basis from Jan 1, 2019 instead of monthly, as the government works towards lowering fuel prices.

In a statement, Lim said the government will work towards lowering retail prices of petroleum products, including RON95, starting Jan 1, 2019, because prices are currently set on a monthly basis.

“Subsidy for petrol products from May to November 2018 amounted to RM5.82 bilion,” Lim said.

He said setting retail prices of petroleum products on a weekly basis will enable consumers to enjoy rapid price changes, in line with petroleum price changes in world markets.

As such, retail prices of petroleum products in Malaysia are expected to drop from Jan 1, 2019, according to him. He said if the downtrend in world crude oil prices continues, retail fuel prices in the country will be lowered every week.

In the statement, Lim also explained the retail fuel price-setting mechanism, if crude oil prices rise.

“In such situation, the rise in retail fuel prices will be controlled and capped at RM2.20 a litre for RON95 dan RM2.18 for diesel. These prices will be maintained until the implementation of the RON95 petrol subsidy in a targeted manner in 2019,” he said.

Today, he said the government will implement the targeted RON95 petrol subsidy for the deserving segment of consumers.

“For those outside the segment, retail prices of RON95 petrol will be floated in a controlled manner to reduce the government’s subsidy burden and in line with the government’s intention of giving the subsidy to benefit the targeted segment, especially those with low income,” Lim said.