The  Ministry of Energy has promised action to force lower petrol prices after consumer complaints that drops in international crude costs have not been reflected at Myanmar’s pumps.

Petrol sellers throughout the country could soon face a price ceiling set by the Myanmar Petroleum Trade Association.

“We want the price to go up or down in accordance with international prices, but this hasn’t happened in recent months,” said deputy energy minister U Aung Htoo. He referred to a general drop in international crude prices since September, as oil as fallen by about 50 percent on international markets in less than a year.

“Rather than the ministry forcing through a fixed price, it would be better if the public and traders accept a common price announced by the association,” he said at a press conference on March 21.

Currently there are about 50 to 70 licensed importers and more than 2000 petrol retailers across the country, according to Myanmar Petroleum Trade Association secretary U Win Myint.

Its efforts to set a price ceiling are already under way. The association has spoken with representatives from fuel importers and received agreements from most of them.

“We will make an announcement on a weekly basis and then on a daily basis,” he said.

“No shops will have the right to sell above a fixed price. If they refuse to back down, the last punishment will be to suspend them from being a member of the association, as it is important to be a member of the association to get support from the ministry.”

Experts and members of the public alike have voiced concern that the local price at the pump has not fallen as much as it could have with the international drop in oil.Ken Tun, chief executive officer of Parami Energy, previously said that for consumers in the United States for instance, if crude prices fall, petrol prices also drop automatically.

In Myanmar though there is a lag, with local prices not as responsive to the international cost of crude oil. He said in Thailand, the government stays on top of the international price, the cost of importing fuel and the local price, while in Myanmar the policy can be restrictive, allowing too few companies to control the situation.

“So the public doesn’t fully profit from the price fall,” he said previously.

Although petrol stations set their prices independently, prices have generally fallen somewhat. Diesel at one station in Taungoo now costs K700 per litre, while it cost K960 per litre in September, before crude began its steep decline of about 50pc. Similarly, at the Taungoo station, 92 Octane is now K680, whereas it was once K970.

New Day Energy Limited managing director U Hla Myint Maung said using the price ceiling would still allow for some profitability, though he added concerns the big companies would respect the price ceiling and smaller shops would avoid it.

“We will probably follow the indicated price, as I don’t think it is too rigid,” he said. U Hla Myint Maung said there are more factors than the price of crude that determines prices at the pumps.

For instance, logistics for importing and exchange rate fluctuations are also important for profit margins.

“People lay blame, saying when crude oil prices drop, local petrol stations take too long to drop their price. But even with the price of crude down by half, the exchange rate has been moving against us,” he said.

U Hla Myint Maung added that for the ceiling to be successful, it is important that petrol stations keep watch on each other for transgressions.

U Aung Htoo also confirmed the ministry is considering plans to allow joint ventures between international downstream petroleum retailers and the government in a bid to professionalise the industry.

Source: Myanmar Times (By Su Phyo Win   |   Wednesday, 25 March 2015)