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Government presses for price cut on petrol

Government presses for price cut on petrol


Minister of Finance Keat Chhon urges fuel companies to lower pump prices but high international oil costs might force consumers to wait

Rick Valenzuela

A mortorcyclist fills up at a Phnom Penh streetside fuel vendor. Prices fell after government pressure, but not by much.

500 R

Cut in petrol prices per litre since last week.

Consumers struggling with record-high petrol costs may have to wait for further price cuts until current stocks of higher-cost fuel are sold off by oil companies.

Petrol and diesel prices at most Phnom Penh stations dropped 400 to 500 riels (US$0.10) per litre at the weekend following a meeting last week between the government and oil companies where finance officials pressed for a cut in pump prices.

"We asked all major companies to consider reducing petrol and diesel prices," said Chuo Vichet, chief of Cabinet for Finance Minister Keat Chhon.

He said Keat Chhon met petroleum majors Sokimex, PTT, Kampuchea Tela, Total Cambodge, Caltex and Savimex on Thursday to press for a price cut.

"We did not order [oil companies] to cut petrol prices, but being partners, we hope companies reduce prices step by step," Chuo Vichet said Sunday.

He said high international crude costs were the most important factor behind the high petrol prices.

"We understand that this is a free-market economy, but the government is hoping petroleum distributors drop gasoline to a reasonable level for consumers," Chuo Vichet said.

Following the meeting, petrol and diesel at most Phnom Penh stations dropped from 5,600 riels ($1.40) per litre to 5,200 riels for premium fuel. 

Medium-grade petrol prices dropped from 5,500 riels per litre to 5,300 riels. Diesel  prices remained the same as premium.

Crude oil closed at $115 per barrel on Monday.

Cambodia imports about 100,000 tonnes of oil per month, according to Finance Ministry figures.

All of Cambodia's petroleum is imported with pricing based on the Singapore Tapis system. Cambodia's largest petroleum company, Sokimex, said that local prices would fluctuate with  the international market.

"We are willing to reduce the price in line with international crude prices," said Heu Heng, deputy director of charge marketing of Sokimex.

Sokimex reduced petrol prices to 5,250 riels per litre from 5,650 riels last week. Diesel went from 5,600 riels to 5,400 riels, he said.

Seng Chungly, network manager for Total Cambodge, said the company was cutting prices by 350 riels after meeting with Keat Chhon.



He claimed that Total was selling petrol for a loss because its current stock was bought last month for a higher price.
Bin May Mialia, a petroleum analyst, confirmed that Cambodia's petrol companies met Keat Chhon on Thursday to discuss cutting petrol and diesel prices.

"It is a good time for petroleum companies to reduce their prices based on the decline in international oil prices," Bin May Mialia said.

He said that the Cambodian government could play a more active role in ensuring cheap petrol and pointed to Vietnam as an example.

Vietnam eliminated import tariffs and instituted subsidies, driving pump prices far below Cambodia's. Thailand also has taken  steps to cut pump prices by promoting ethanol fuel and bio-diesel, which is cheaper than conventional petrol.

Lower prices in Vietnam have led to smuggling into Cambodia, Bin May Mialia said.

"If one neighbour has low prices, it leads to smuggling," he said.

About 40 percent of petrol prices at the pump are government taxes, said the Caltex Australia division website.

Time delay

But lower international oil might take months to translate to cheaper fuel at the pump. Local companies buy oil one or two months in advance, meaning they have to clear their more expensive stock before adjusting prices, said a petroleum expert.

"Many petroleum importers bought oil one month ago when it was expensive, so they need to sell at a high price too. When they sell their current stocks, they can import lower-priced [oil] and adjust the price.... Many people do not understand the process of petroleum importing," said an anonymous source from the Cambodia  National Petroleum Authority (CNPA).

The president of the Cambodian Independent Teachers Association (CITA), Rong Chhun, said the petrol price cuts are not significant.

Pump prices are "still above international levels", he said.

"Petrol prices should be 3,500 riels per litre."

Spiralling fuel prices have hit hardest Cambodia's poor and driven up the price of other consumer goods.

Rong Chhun accused the government of colluding with powerful petroleum companies.

"Nepotism and corruption and lack of competition are the major reason for the inflated petrol prices," said Rong Chhun.


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