Fuel providers are considering passing cuts to Cambodian consumers after oil drops 20 percent on global markets

PETROL prices are set to drop within the next week, a marketing manager from Thai Oil Company PTT said Tuesday, as Cambodia begins to fall in line with international markets.

Petrol prices in the Kingdom have declined around 2 percent so far this May, while the price of crude oil on the international market has dropped almost 20 percent.

Local suppliers said Tuesday that the discrepancy resulted from companies using up stock that was purchased when international oil prices were high.

According to statistics from the Commerce Ministry’s trade promotion department, the price of a litre of premium gasoline on Tuesday was 4,550 riel (US$1.07) – a 2.14 percent drop from the May 1 price of 4,650 riel.

A litre of regular petrol was 4,300 riel – a 2.2 percent fall from the May 1 price of 4,400 riel.

However, a barrel of crude oil (159 litres) was $69.18 on international markets Tuesday – a 19.7 percent drop from the May 1 price of $86.22 a barrel.

Managing director Total Cambodae, Stephane Dion, said in an email Tuesday that there is a time lag before price changes are passed on to customers.

He added that the slow decline in domestic petrol prices was also because of high custom duties, which are not linked to fluctuating oil price.

“Custom duties payable to the government are a fixed amount per litre that does not depend on the relative price level of oil products,” he wrote.

He said another contributing factor was the depreciation of the riel against the US dollar, the currency with which crude oil is purchased.

According to the Ministry of Commerce, the riel has depreciated 1.36 percent in a month, down to 4,247 riel a US dollar on Tuesday from 4,190 riel a US dollar a month earlier.

Thai Oil Company PTT marketing manager Bin Many Mialia agreed that current stocks of expensive oil and a depreciating riel are the main reasons that price cuts are not being passed on immediately.

“We’re considering dropping the prices further, as the old stock bought at a high price is now running out and the new imported oil stocks, bought at lower prices, are starting to be sold,” he said.

“Further drops will begin sometime from this weekend or next week,” he added.

Ministry of Economy and Finance Secretary General Hang Chuon Naron said Tuesday that the ministry was observing oil prices closely, as it is a key factor that affects inflation.

He said he was aware the international price cuts are not being reflected in Cambodia, but that there is little the government can do.

“It’s a free economic market. We cannot put pressure on them to lower prices, but what we can do is suggest they keep the price low,” he said.

Normally, oil companies buy enough oil for a one-month period when prices are high and a three-month period when prices are low, he added.

He confirmed that the government taxes oil imports at a fixed rate of $300 per tonne, regardless of whether the prices are going up or down.

This practice, he said, helps to keep prices low even if the prices on the international market soar.

Oil’s relative strength index is at its lowest since September 2006, according to Bloomberg reports Tuesday. The plunge may stop at $66 a barrel, analysts said.