“This (fuel price increase) is an international problem, which we cannot avoid”: Secretary of Myanmar Petroleum Trade Association

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Dr Win Myint, secretary of Myanmar Petroleum Trade Association.

Dr Win Myint, secretary of Myanmar Petroleum Trade Association, in an interview with the Global New Light of Myanmar, talks about the fuel oil price increase of Ks100 per litre in the domestic market.

 

Q: The fuel price keeps going up. How much has the price increased?
A: The fuel oil price has increased by Ks100 per litre by 17 May compared with the price on 2 April. The price is gradually increasing, and it has reached a remarkable high within a month.
Q: What is your view on the increasing fuel price?
About 95 per cent of the fuel oil is imported into the country. Therefore, the domestic fuel oil price depends on the purchase price. The second factor is the dollar exchange rate. We purchase imported fuel oil in dollars and sell them in Myanmar currency. The third factor is the taxation policy. Since the last two years, the taxation policy has not changed. These factors have contributed to the increasing fuel price. When we analyse the fuel prices on 17 May and on 2 April, we notice that the taxation policy has not changed. The policy is much better than before, because earlier, two per cent of the advance income tax was being paid. Now, the Self Assessment System (SAS) helps taxpayers calculate their tax liability precisely. Earlier, retailers added extra charges. The SAS will help eliminate the unnecessary additional charges. A better taxation system facilitates consumers. The US dollar exchange rate on 2 April was Ks1,330. The rate soared to around Ks1,350 per dollar. There is a gap of Ks19 between the exchange rate in early April and the current rate. This affects the price of imported items. This being so, I would like to mention that the increasing fuel price is attributed to the high exchange rate.
Next, the global fuel oil price is up by US$10 per barrel compared to last month. We calculate the value of goods on the basis of the high global fuel oil price and the kyat depreciation. Thus the cost of fuel on 17 May increased by Ks110 over the previous months. So, the sales price is going up in the market. The wholesale price of fuel oil is up by Ks100 per litre. The retail price of diesel has increased, while the gasoline price is up by Ks50 per litre.
Q: According to the market condition, the original cost is up by Ks110, while the sales price has risen by Ks100. Can we determine the loss?
A: I would like to point out that the current price is still less than the original cost of imported fuel oil from foreign countries. Whether it is a loss or not depends on the individual company that sells the fuel oil. Some companies have a stock and so, they are selling the fuel oil at a profit. However, the fuel oil price is fluctuating. They might make a loss when the oil is out of stock. We cannot simply determine whether the company makes a profit or loss, which is based on the foreign exchange rate and the international price. We cannot calculate it and set a steady price as companies import the fuel oil on different days. Our sales price is less than the imported oil price as we still have stocks left.
It is unreasonable to remark that the sales price is up for no particular reason. We were bitterly criticised for two years. We neither monopolise the market nor maximise profits exorbitantly. We are controlled by the market-oriented system and cannot manipulate the price. Otherwise, the competitive market means no market power to profitably raise the market price of goods. This is a better way for competitive markets having no monopoly. Authorities cannot intervene in this according to the current market conditions. Also, businessmen cannot negotiate each others on setting the price.

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A worker fills a car with fuel at a refilling station in Yangon. Photo: Aye Min Soe

Q: What’s the short-term forecast for the domestic fuel market?
A: I do not want to make a statement for the short term on account of the unstable economic climate. If the US president lifts the sanctions against Iran, the petrol price is likely to drop immediately. Similarly, if the Russian president sells the country’s stock, the price will plunge. Thus, it is not possible to forecast the domestic market condition.
Q: Fuel oil plays a crucial role in the country. If the price keeps rising, what will be the impact on the economy and who will suffer the most?
A: This is an international problem, which we cannot avoid. Fuel oil is a fundamental good, as oil is used for transport, as well as in the food chain. Therefore, it will affect all kinds of sectors, such as manufacturing and transport. However, we can review its impact. We need to consider whether the family expenditure will rise due to the rising fuel oil prices. As far as I am concerned, consumers will not remarkably suffer from the current market price because in freight forwarding, the effect will be less than two kyats per viss (1.6 kg) on goods. The forwarders do not seem to be taking advantage of the high fuel price to scale up the price of goods, while the passenger transport sector will not see a significant impact.
In addition to these, some political agitators have commented on the fuel price during the incumbent government’s tenure compared to that of the previous government’s tenure.
Q: How much volume of fuel oil do you distribute each month? Do fluctuating prices impact the distribution channel and demand?
A: On average, we distribute 200,000 tonnes of gasoline and some 400,000 tonnes of diesel each month. While sometimes the prices can help save on consumption, it is possible it affects demand to a certain extent.
Q: The government controls the price in some countries. Will that kind of intervention result in a stable price?
A: The existing market-oriented economic system is the most effective economic framework, which allows an open market system. Prices are free to fluctuate in a free market economy and so, no intervention is possible.
Controlling the price is against the free market economy, which has its merits and demerits. Some countries adopt this system. The price controlling system will give gross profit margins and companies will not make a loss. This system provides market indication and prevents the rise in price. At the same time, we offer discount services. The control pricing system with a regulatory framework is expected to correct the market. It cannot always depend on the purchase price, as the price may vary, and sellers cannot trade together at the same price in the open market. This being so, we need to study further how other countries practise the control pricing mechanism. Nevertheless, there is no official response from the government concerning the control pricing system. However, the officials concerned are considering this system. I believe the government will carry out an effective framework to facilitate consumers and also not harm businessmen.
Q: As you said, companies that have massive stocks will not incur a loss. What are the difficulties faced in the storage of fuel and maintaining the stock condition?
A: There is no problem. We can stock and import fuel oil. But, the permits are separate for individual groups for the construction of fuel oil tanks and for importers. Importers have to store the stocks in the tanks of other authorised companies. Some businessmen still require to construct fuel tanks keeping up with the authorised groups.
Q: How many companies and fuel stations are present across the country?
A: There are 2,000 fuel stations and 50 companies in Myanmar.
Q: Please explain the fuel market price in Myanmar being the second lowest among ASEAN member countries.
A: The reference has been taken from the website: www.globalpetrolprices.com. Malaysia recorded the lowest fuel price and Myanmar stands at the second place.

 

By May Thet Hnin

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