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Petrol prices drop after PM demands results

A roadside petrol vendor fills up the latest batch of Pepsi bottles in Phnom Penh.
A roadside petrol vendor fills up the latest batch of Pepsi bottles in Phnom Penh. TRACEY SHELTON

SOKIMEX led a drop in gasoline prices on Wednesday after repeated demands by Prime Minister Hun Sen that petroleum companies cut  the cost of fuel at the pump.

The reductions were aimed at bringing pump costs in line with falling crude prices and to mark the January 7 Victory Day celebration.

Crude prices have fallen from about US$145 in June 2008 to below $50 currently.

Prices rose slightly over the week following the Israeli bombing of Gaza that has killed more than 630 Palestinians and threatens regional stability.

By Wednesday, Sokimex's petrol price was 2,850 riels (US$0.69) per litre for regular and 2,950 riels for premium.

That represents a 50-riel drop compared with Tuesday's price of 2,900 riels and 3,000 riels, respectively.

The cuts came a day after Hun Sen called on petroleum companies in Cambodia, particularly Sokimex, to again lower prices.

"[Petroleum companies] should all consider dropping their prices," he said during an inauguration speech for the new Stung Meanchey bridge on Tuesday.

There is not a one-to-one relationship between oil prices and the price of petrol.

He added that petrol prices in Cambodia were still above global price levels.

"In previous years, when the global oil price was the same as today, petrol in Cambodia was only 2,400 to 2,500 riels."

Not so fast

But one UK-based oil and gas expert said that lower crude prices take time to trickle down to consumers.

"There is not a one-to-one relationship between oil prices and the price of petrol. ... You also have to take into account the cost of transportation, margins and refining," said Iain Armstrong, an oil analyst at the commodities firm Brewin Dolphin in  London.

He estimated that 95 percent of crude price increases are reflected at the pump within four weeks, while about 80 percent of crude price drops translate into  lower petrol within six weeks.

Armstrong added that stubborn petrol prices are in part caused by refineries slowing or stopping production.  

"Refiners have been quick to turn off the taps on recession fears," he said.

A December report on Asian petrol production expected higher prices in the beginning of 2009.

"Asia's benzene producers could keep operating rates below capacity in the first quarter of 2009 in anticipation of weak downstream demand," said the petrochemical chemical newswire Icis.

Further price cuts needed

But a local labour leader said his union members, who are often paid very little, are tired of expensive petrol.

Rong Chhun, president of the Cambodian Independent Teachers Association, said he would like the prime minister to demand additional price cuts.

"I would like Prime Minister Hun Sen to call for ... more price cuts," Rong Chhun said.

"I have not seen much change after the prime minister called on petroleum companies to drop gasoline prices on December 22, 2008," he added, saying that petrol costs remained high even in the face of steep falls in international crude prices.

Since Hun Sen's call for lower prices in December, Caltex and Total have kept pump prices steady, with regular at 2,950 riels per litre and premium at 3,050 riels, he said.

Sokimex and Tela dropped their prices from 2,950 riels to 2,900 riels by Tuesday.

On Wednesday, only Sokimex dropped its price to 2,850 riels per litre.  

Kang Chandararot, director of the Cambodia Institute of Development Study, said that over time, he expected further price cuts in line with international crude.

"I do not know how much the price should be because I do not know the margins that petroleum companies earn in Cambodia," Kang Chandararot said.

He added that the government should publicise petroleum companies' profit margins.   

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