Gov’t considers fuel legislation

A sign displays fuel prices at a petrol station in Phnom Penh
A sign displays fuel prices at a petrol station in Phnom Penh last week. The government is considering intervening in the fuel retail sector to assure retailers deliver price cuts in a timely manner. Eli Meixler

Gov’t considers fuel legislation

The Cambodian government is considering legislation to control consumer fuel prices in an effort to increase savings during the global oil price plunge.

During the Ministry of Mines and Energy’s general meeting last week, Minister Suy Sem asked officials to consider fuel price legislation as a way to monitor and manage market fluctuations, Meng Saktheara, secretary of state at the ministry, said yesterday.

A team has been assigned to investigate the fuel price legislation and, if deemed feasible, the legislation will be written into the draft petroleum law, which is due to be submitted to the Council of Ministers by the end of the year, according to Saktheara.

“Right now, gasoline prices are essentially unregulated and I think it is a bit of a monopoly as gas stations are free to set prices at whatever they want,” he said, adding that retail petrol prices remained high compared to the global decline of oil prices.

“It is a critical moment – a turning point for us to think seriously about oil price fluctuations and try to come up with a strategy for the country to benefit if the global oil price stays low.”

Crude oil is fetching $46 a barrel on the New York Mercantile Exchange, down 54 per cent from more than $100 a barrel in July last year.

Saktheara insisted that no details of Cambodia’s potential fuel price legislation were yet available.

Revelations of the ministry’s fuel price legislation proposal marks a shift in the government’s otherwise soft approach of trying to encourage retailers to pass on savings to the consumer during the commodity’s decline.

In his second attempt in as many weeks, Commerce Minister Sun Chanthol on January 20 called for Sokimex, Tela, PTT, Caltex, Bright Victory Mekong Petroleum, Total and Savimex to reduce pump prices to 3,900 riel ($0.96) per litre.

“In response to the request of the Senior Minister Sun, the representatives of Sokimex and Tela have decided to reduce the gasoline price (Regular) from 4,000 Riel to 3,900 Riel per litre while PTT will reduce their price to 4,050 riel per litre effective from 21 January 2015,” a Commerce Ministry statement said.

“The representatives of other foreign companies will confirm their price reductions after receiving the approval from their regional management team.”

Data published by the Commerce Ministry show that foreign fuel distributors Caltex and Total have reduced their petrol prices to 4,100 riel per litre and 4,050 riel per litre respectively since January 13.

Ken Ratha, spokesman for the Commerce Ministry, declined to comment on the legislation proposed by the Ministry of Mines and Energy.

“The MoC is taking the position as facilitator to discuss with the private sector the possibilities and challenges that petroleum distributors face,” he said.

Ratha added however that a new competition law will also help domestic fuel prices adjust naturally to market forces.

“We have almost finalised a competition law, which intends to regulate and ensure fair and honest competition and also encourage more competition in the country,” Ratha said.

In addition to the potential new pricing controls for fuel distributors, Cambodia’s new petroleum law is expected to outline fiscal terms such as taxation and royalties for upstream oil and gas firms operating within the Kingdom.

Opposition leader Sam Rainsy welcomed the prospect of tighter controls on the retail fuel market.

He said bolstering regulation could end the pricing monopoly at the pump and encourage distributors to stop smuggling fuel into the Kingdom to avoid paying import fees.

“A legislative approach could be positive by possibly bringing about more transparency and being more conducive to public debate the now opaque petrol distribution industry,” Rainsy said yesterday in an email.

“Some well-connected companies benefit from smuggling activities, meaning their buying costs are lower than those of legitimate companies. This distorts competition and deprives the state of much-needed revenues.”

Rainsy also called for a tax reduction on retail fuel prices from 1,000 riel per litre to 500 riel per litre in order to further reduce prices at the pump and potentially widen the revenue collection base.

Bin Many Mialia, deputy managing director for corporate affairs at Thai-owned PTT (Cambodia) Limited, similarly welcomed the prospect of industry-wide pricing regulations saying it will bring about better transparency in the market.

“It would be a positive sign for the country especially because it would be good for consumers and suppliers,” Mialia said.

“Once all these regulations have been enforced there would be more transparency in the oil business in Cambodia.”

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