Petrol Dealers Association of Malaysia (PDAM) president Khairul Annuar Abdul Aziz has clarified that the challenges faced by petrol station operators are primarily driven by cashflow uncertainty linked to fuel price volatility.
He said operators function as price takers, with prices set by the government, while oil companies control the supply and allocation of fuel.
“Dealers also have limited storage capacity and are not in a position to manage inventory for speculative purposes,” he added.
Khairul also revealed that his association is in discussions with the government to address concerns like these.
He told Malaysiakini the issues included a one percent merchant discount rate, evaporation loss per litre of fuel, and overall margin sustainability.
“A number of proposals have been submitted, and discussions are ongoing towards finalising practical and balanced solutions for the industry.
“PDAM would also like to emphasise that we prefer to engage these matters directly with the relevant authorities, where constructive discussions are already ongoing,” he said, referring to the Finance Ministry, Bank Negara Malaysia, and the Domestic Trade and Cost of Living Ministry.
Khairul cited a Malaysiakini report earlier today that quoted Bumiputera Petrol Station Dealers’ Association of Malaysia (Bumipeda) president Abdul Aziz Sapian.
Aziz had said that fuel prices set by the government’s automatic pricing mechanism created a “mismatch” with the prices paid by operators.
“This creates a situation where retail prices change faster than the actual cost of stock at the station level. As a result, operators are exposed to price volatility risks,” he had said.
Credit terms affecting cashflow stability
In response, Khairul said the situation is best understood in terms of cashflow uncertainty and highlighted the need for adequate credit terms across the industry to keep operations stable during fuel price changes.
“For dealers with established credit terms, cashflow pressure during price movements may be partially mitigated, as they are able to sell existing stock before payment is due based on their credit terms.
“In addition, incoming customer payments (electronic payments) and subsidy reimbursements, which are typically received on a T+1 (day after) basis, can help support cashflow,” he explained.
Credit terms are agreed upon between petrol dealers and their suppliers and can vary among dealerships, while subsidy reimbursements are set by the government.
“Where credit terms are sufficient to match or exceed these payment cycles, the need for immediate additional capital injection may be reduced.
“However, this is not uniform across the industry. Dealers without adequate credit facilities, or those facing supply or financing constraints, may still encounter significant cashflow challenges,” said Khairul.
“This further reinforces the importance of ensuring adequate credit terms across the industry to support stable operations during periods of price volatility,” he stressed.
Further, he explained that when prices rise, the value of existing stock and the cost of replenishing inventory increase, placing pressure on working capital and financing needs.
Conversely, when prices fall, dealers risk incurring losses as higher-cost inventory must be sold at lower regulated prices.
“At the same time, cost components such as Merchant Discount Rate (MDR) and evaporation losses increase in absolute terms as fuel prices rise, further tightening margins.
“Sustained higher prices may also lead to a reduction in sales volume, affecting overall sustainability,” he said.
Fuel price changes and subsidies
On April 8, the Finance Ministry announced a 70 sen increase in the retail price of diesel to RM6.72 per litre in Peninsular Malaysia, despite a drop in global oil prices in the wake of a ceasefire in the Iran war.
The ministry also announced that the retail price of RON97 petrol increased by 40 sen to RM5.35 per litre, while the retail price of RON95 petrol increased by 40 sen to RM4.27 per litre.
At the same time, subsidised RON95 petrol for eligible Malaysians remains capped at RM1.99 per litre with a monthly quota of 200 litres.
The Madani administration has also made subsidised diesel available at RM1.88 per litre, RM2.05 per litre, and RM2.15 per litre, depending on the industrial sector.
The initial drop in global oil prices follows the announcement of a ceasefire between Iran and the US, after five weeks of conflict had sparked a global energy crisis.
However, US Vice President JD Vance said on Saturday that Washington and Tehran had failed to reach an agreement after two days of negotiations. - Mkini
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