Local petrol retailers have passed on minimal savings to consumers despite the global oil price’s dramatic slide over the past six months and repeated calls from the Cambodian government to drop prices. Consequently, questions surfaced this week over fuel providers’ motivations and profits during the oil-price plunge.
Bin Many Mialia is the deputy managing director for cooperate affairs at Thai-owned PTT (Cambodia) Limited, one of the Kingdom’s leading gasoline providers. He spoke to the Post’s May Kunmakara about the global oil price and the challenges for local fuel providers.
Cambodia’s consumer fuel price remains at more than $1, and is decreasing at a significantly lower rate than the price per barrel, which has sunk by more than 50 per cent since July. How do you explain that discrepancy?
Global oil prices have not declined only be/cause of market demand and supply. Oil prices collapsed in the fourth quarter of 2014, we could say because there was a “price war” during the third round of sanctions against Russian.
PTT is not a main player in the Cambodian oil market. We are always operating alongside the domestic market trends, but not necessarily alongside market prices. We do change our prices, but based only on our own costings at the inventory movement phase.
We use a formula price based on the Moving Weighted Average method, not the first-in, first-out method, and not the last-in, first-out method of in calculation.
Would you say that Cambodia’s retail fuel prices are relative to the global oil price decline?
The current retail price is a bit slow, but as I mentioned, the oil price collapsed. It did not gradually decline as a result of market demand and supply. Therefore, during such a situation, we could not afford to sell all of our wholesale stock at such a price.
The company bought the inventory when costs were much higher. As a result, the retail price has seen slower movement. Despite all that, the company’s prices must still decline relative to global oil prices.
Recently, the government held meetings with fuel retailers and requested they shrink prices at the pump for the Cambodian consumer. Do you think the government is interfering in what should be a natural price evolution in a free market?
The government didn’t interfere on setting any price with our oil company. However, they did request us to meet and discuss the possibility of reducing pump prices.
Experts have suggested that Cambodia’s retail fuel price should be below 4,000 riel per litre by now. Does that make sense to you?
Everyone can say what they want; there are no rights and wrongs. The main thing is how you survive during an oil price collapse. You need to look at the bigger picture – look at the full forest of trees, not just at a single tree.
In our business, we have to consider the bottom line, taking into account all our products, transportation and logistics costs in order to weigh up and balance our costs, rather than focusing simply on a price war.
There are more than 10 gasoline suppliers in Cambodia. Some complain that whenever the global price increases, our local gasoline stations are very fast to increase the retail price. What is your response to this criticism?
It is the nature of business. So far oil prices have been dropped many times. How slow or fast the retail price adjusts depends on inventory ratios.
But it’s still better than the price of other secondary industries that are significantly impacted by the price of oil, such as transportation and consumer products. We see no price adjustment in those areas.
What are the current taxes on fuel imports for retail operators?
The fixed tax base for gasoline is at $785 per tonne, and $580 per tonne for diesel through the Customs and Excise Department.
So, are high customs taxes the main reason that importing oil prices remain high?
Yes. Firstly, import taxes/duties are higher than our bordering countries. Secondly, operating expenses are high. Thirdly, administration fees are high. And lastly, the company also has to consider its own expansion, upgrades and investments.
Cambodia could potentially begin oil production by 2018. Do you this will help reduce the country’s reliance on fuel imports and reduce retail prices?
I don’t think so, unless the government conducts adequate economic feasibility studies and sets a proper regulatory and working base for oil companies.
This article has been edited for length and clarity