Tuesday, October 14, 2008


Mechanism to deal with fuel prices


A collective decision on the adjustment of fuel prices would probably be decided by a proposed high-level 1 - committee soon. The committee, if approved, would comprise the Prime Minister, the First and Second Finance Ministers and the Domestic Trade and Consumer Affairs Minister, and would decide the retail prices of fuel and diesel outside the Cabinet. Eventually, the Cabinet would be informed of the decision made by the four key persons soon, according to the Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad yesterday. “I have suggested this new mechanism ... to speed up the decision-making process. We want to make faster and possible earlier decision. (And later) We only need to inform the Cabinet,” he said, adding that the proposal had been suggested to Datuk Seri Abdullah Ahmad Badawi, who had responded positively. Asked when the new mechanism could be implemented, he said, the Cabinet would discuss the matter on Friday. He described the global price movements on fuel as “too fast”, and sometimes within days, therefore the Government has to take a lot of matters into consideration before deciding on the retail fuel prices. “We can adjust the retail prices of oil and diesel but it has to be practical. We cannot wait too long before reducing the prices as many petrol kiosks will suffer losses, “ he explained. Asked on the proposal by Gerakan that the fuel prices be monitored and reviewed on a weekly basis, he said, the Government had in fact been monitoring the prices on a daily basis. However, Shahrir said, the monitoring period for price adjustments should be done at a reasonable interval. “If it is on a weekly basis, the reduction will not be significant. At the moment, we are taking a 30- day average, but sometimes less than that. It is based on practicality and we have to be reasonable,” he said. Shahrir said until now, the Government has been trying to be responsive to the ever-changing crude oil prices by reducing prices at the fuel kiosks just before Merdeka Day and Han Raya, within a three week period. Speaking to reporters after meeting with the Ministry’s officials in Sabah, Shahrir said that one mistake by the Government was the sudden increase of fuel prices, but added that it was due to the hike on oil and diesel prices globally. “The fuel prices increased in 2006 and again in 2008. The Government was very considerate on whether to increase the prices or not, but we had to increase the prices following the hike worldwide. That was the only mistake,” he said, adding that the new mechanism would help them to face a similar situation in the future. On another development, the move by some petrol stations to cancel orders for fuel for fear that the prices might go down, would not affect the supply as the petrol kiosks involved were not many, he said. “There are many other petrol stations in the country which have been replenishing their supplies. Fuel is a controlled item and the Ministry will ensure the supply is enough,” he stressed. Shahrir added that petrol kiosks stop making orders temporarily to refrain from maintaining a huge inventory. “The petrol station owners fear they will suffer some losses when the Government reduce the fuel prices,” he said. However, the Ministry, he said, was cooperating with oil companies by advising them not to supply a huge amount of fuel whenever price reduction was imminent.