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Thursday, May 11, 2017

One Bungle After Another : Petrol Stations Closing Down Pula ! !

Petrol station operators hit by weekly swing in fuel prices

Many petrol station operators giving up operations 

can no longer cope with weekly swing in retail fuel prices

Petrol Dealers Association of Malaysia (PDAM) said 

since Dec 2014,  30 to 40 stations per brand surrendered ops

More in recent weeks following weekly price change mechanism April 1

more dealers will give up dealership if trend continues

Shell, Petronas, BHP, Caltex, Petron nationwide affected 

Sabah and Sarawak traffic volume was lower.

especially in areas with too many stations within vicinity like JB  

dealers don’t have convenient store income to subsidise loss

dealers to retrench workers to cut overhead expenses

14,000 people will lose their jobs 

total of 3,500 petrol stations nationwide, workforce of 50,000

21% foreign workers, rest are locals

40% foreign workers in urban areas

selling fuel at loss due to drop in ceiling price

total loss for dealers if they cannot clear  before new price 

especially for RON97 and diesel where stock is high

drop of 10 sen will wipe out all margin for petrol sales 

dealers have to sacrifice margin for govt's weekly price mechanism

dealers could lose RM3,000 - RM5,000 per week 

some stations only make around RM5,000 net monthly

Calling the price change “unhealthy”
dealers hoping for no more than 5 sen price 
to stabilise market and cushion gains or losses

commission due to petrol dealers should also be reviewed 

Diesel sells less but stock is high and gross margin is only 7 sen.

drop of 10 sen hits hard 

My comments :  First of all fuel is an absolute necessity. The market and the demand is still there - at least for foreseeable future. 

After decades of subsidies, the fuel prices are now more market driven.  This is where the gomen does not know how to handle the situation. In this country most things the gomen does are far, far removed from the market.

Put in some market forces and they go haywire.  Another classic case of the gomen interfering in business.

Why not let the market set its own prices?   

In the US for example each individual gas station determines their own selling price.

Just let the oil companies  Shell, Petronas, BHP, Caltex, Petron   determine their own prices.

The petrol stations are usually franchise operators. If  Shell, Petronas, BHP, Caltex, Petron   cannot sell their petrol and diesel,  then they will  suffer losses.  So it is the oil companies that will have to manage the situation with their franchisees.

As the PDAM fellows are complaining the   commission due to petrol dealers should also be reviewed .

This is an internal matter between the oil companies and the petrol stations. The gomen should not get involved in micro-managing the petrol station business.

The market should find its own solution. All we need to do is allow sufficient market forces to come into play.

Conclusion : For the past 40 years there has been massive gomen intervention in almost every aspect of economic pricing in this country.

The price of fuel, the price of rice, the prices of cars, the price of anything and everything has seen gomen interference and meddling. The net result is that the Malaysian consumer has always been paying more than what we should be paying.

Some grades of rice are cheaper in Australia and Singapore than in Malaysia. 
In the US and Europe cars cost one third or half the price in Malaysia. 

Yet the unknowing consumers in Malaysia just accept their fate.
These are real issues worth gathering for at the Dataran Merdeka. 
But the masses are meek. So we get abused.

With the collapse in oil prices (with no recovery in sight like forever) the  great 'lets-burn-our-oil-money' experiment of the past 40 years or so  is coming to an end.

Now we have to learn to deal with reality.  The reality is the free and open market awaits us.  This is the greatest ocean that anyone can sail in. It is the greatest gift of paradise here on earth.

Ignoring the free market  has brought some sections of our society to their present predicament. Ignore the market at your great peril. Sooner or later the market will catch up.  

This is happening now not just in Malaysia but in all the despotic oil producing countries.

Market forces may cause a stinging sensation in the beginning but in the long run, things will settle down.  

Fuel prices may jump up (or maybe down) and cause initial turbulence but in the long run, they will settle down.

The gomen policy makers should not get too involved. In the US, UK and the West the Harvard educated and the Cambridge educated do not try to mess as much with the market forces. Do our village kids really expect to be cleverer?  

Deregulation and freeing the market will grow our economy and advance the people. Anything else will create problems.

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