PETALING JAYA: Petrol station operators are at risk of closing down under the automatic price mechanism Putrajaya uses to fix the retail price of petrol and diesel, PKR said, noting that at current pump prices, retailers would have racked up losses of up to RM15,000.

They would have to bear this loss for the rest of the month, and run the risk of having it snowball into larger amounts of debt owing to the higher price they paid to petrol companies, PKR secretary-general Rafizi Ramli said yesterday.

The Pandan MP said that petrol station operators are exposed to losses when oil prices go down because they buy their stocks of petrol and diesel at a higher price.

“Oil companies like Petronas, Shell, Petron and BHP have set that every petrol station buys stock that is at least three days’ worth of their sale at any time,” he said at a press conference at the party headquarters in Petaling Jaya.

“They would have to pay for the stock at market price minus the commission, which is 12 sen for petrol and 7 sen for diesel set by the government.”

He said about 70% of some 5,000 petrol stations throughout Malaysia were small- or medium-sized, and sell an average of 500,000 litres of fuel every month. This would generate RM40,000 to RM50,000 in revenue based on the petrol and diesel commissions set by the government.

“And from that amount, dealers would have to pay utility bills, rental to oil companies, salaries of workers and other charges.

“With these costs factored in, petrol station operators gain a net profit of RM5,000 to RM10,000 every month,” Rafizi said.

The PKR vice-president also noted that these operators would also have to keep a huge amount of reserve money to buy the three-day stock.

“So when the petrol price came down on Jan 1, they automatically lost between RM10,000 and RM15,000 because their stock, which was bought at a higher price, could now be sold at only RM1.91.

“Taking into account their net profit, which is RM5,000 to RM10,000, and the losses incurred in just one day (RM10,000 to RM15,000), [it] means that they will be making losses that month.

“If this continues, many petrol station operators are facing the risk of closure.”

Rafizi said the government had made a “rash decision” to cut fuel subsidies without studying the effect on the people and other stakeholders.

“Without subsidies as the balancing figure, the prices of petrol will keep going down or up, and the changes in prices represent financial risks to the operators.

Rafizi also said consumers were still paying 30 sen to 40 sen more than what they should be paying for petrol and diesel, based on world market prices, and called on Putrajaya to implement a system that would be fair to all. — The Malaysian Insider

This article first appeared in The Edge Financial Daily, on January 8, 2015.