Wednesday, October 15, 2008

Fuel price down, but price of consumer goods remain high

When it was announced that the price of petrol will be further reduced to RM2.30 per litre, I immediately checked my car’s fuel level. I do not want to be caught again without petrol (just like on the eve of Hari Raya).

The petrol stations were reluctant to stock up their petrol supply in anticipation of the price reduction, as they will stand to lose RM20,000 per tanker load if they buy their petrol supply at the higher market price. As a result, many petrol stations (especially in Klang Valley and other major towns) ran out of petrol during the holiday rush.

I became one of their victims, having to spend a good hour or so looking for Shell petrol station with stock on hand. I ended up buying petrol from Petronas, just in time before my car ran into a standstill with an empty petrol tank. Else, I would have been spending my Hari Raya at home (a.k.a. staycation).

It was noted that previously, in anticipation of a price increase, the petrol stations really stocked up their inventories. Image how much they made when the fuel price shot up from RM1.92 to RM2.70 per litre!

Most people (me included) were angry when the government announced the 41% fuel price increase back in June 2008.

The drastic increase in petrol prices from RM1.92 per litre to RM2.70 per litre was unwarranted. The government should have instead opted for a gradual increase.
The 41% fuel price hike had a spiral effect as prices consumer items had also increased drastically. Manufacturers and suppliers used the fuel price hike as an excuse to increase the prices of consumer goods. Although fuel cost contributed to a minor percentage of the total cost of goods, some items had their prices increase by 41% too!

The fuel price hike was too drastic that people at large were never thankful when the government came out with RM625 yearly rebate to private vehicle owners with less than 2000cc engine capacity. In fact, most vehicle owners quickly rushed to the post offices throughout the country to claim the rebate simply because they were too afraid of the government flip flopping which may result in the rebate being disbanded.

Since 4 June 2008 (the date of the initial increase), the petrol pump price has decreased thrice: to RM2.55 per litre on 23 August 2008 (just before Permatang Pauh by election), to RM2.45 per litre on 25 September 2008 (just before Hari Raya), and now (15 October 2008) to RM2.30 per litre.

Yet, with the 15% reduction in fuel prices (from RM2.70 per litre to RM2.30 per litre), we are not seeing any reduction in the price of consumer goods.

The government should have known the mentality of our businessmen. They will happily increase the price of their products instantaneously in response to any increase in petrol prices. But once they managed to increase the prices, they will not lower it down, despite several reductions in fuel prices. In the end, we, the average consumers will be at the losing end.

The Prime Minister too, should have anticipated that the price of goods would remain high despite the reduction in petrol prices. His call for us, the consumers, to use our purchasing power to force down price of goods sounded wise. But he should have been clever enough not to drastically increase the fuel price from RM1.92 to RM2.70 per litre in the first place.

In addition, I am still puzzled and unable to reconcile the correlation between the crude petrol price, the RM0.30 government subsidy and the official price at petrol pumps. In June 2008, CPO was USD140 per barrel and the petrol pump price was RM2.70 per litre. The petrol pump price was RM2.55 per litre in August 2008 when CPO was USD120 per barrel, RM2.45 per litre in September 2008 when CPO was USD100 per barrel, and now RM2.30 per litre when CPO is USD70 per barrel. Perhaps the government has taken into account other factors such as the USD-MYR conversion rate and petrol consumption level in determining the official petrol price to consumers. Some explanation from the Domestic Trade Ministry would be helpful in order to avoid further resentment towards the government by the general public.

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