Saturday December 6, 2008

Government makes RM16mil a day from fuel windfall

By IZWAN IDRIS and LESTER KONG

KUALA LUMPUR: The Government is set to get windfall gains of up to RM16mil per day based on yesterday’s crude oil price of US$44 (RM158.40) per barrel and a consumption estimate of 27.5 million litres per day .

This windfall comes about because the pump prices of fuel have not been reduced enough to reflect the lower crude prices, oil analysts said.

This has prompted the Federation of Malaysian Consumer Associations (Fomca) to request the Government to reveal how it plans to spend the windfall revenue.

Its secretary-general Muhd Sha’ani Abdullah urged the Government to invest the money in public transportation for the benefit of everyone.

The crude oil price in New York fell to a four-year low at below US$44 per barrel yesterday, dragged down by demand worries amid the worsening outlook of the global economy.

At this level, the market price for RON 97 grade petrol should be about RM1.30 per litre, which is 60 sen lower than the RM1.90 per litre Malaysians are currently paying, the analysts said.

Based on a consumption estimate of 27.5 million litres per day, this translates to roughly around RM16.5mil in extra revenue a day for the Government.

It is believed that revenue collected by the Government from RON 97 sales at local pumps ranged from a low of RM100,000 to as high as RM20mil a day since mid-October.

This takes into account international oil price movements, as well as the four price cuts at local pumps over the period. Crude oil prices had slumped 19% this week alone, and was more than US$100 (RM360) down from at its July peak of US$147 (RM529.20) per barrel.

In all, total revenue for the Government from the sale of RON 97 over the past two months would probably be around RM500mil, the analysts, who declined to be named, said. This, however, excludes duty paid by pump operators for sales of RON 92 and diesel.

RON 97 is the most popular petrol grade among Malaysian drivers, accounting for about 80% of total fuel sales at local pumps.

But while the Government gets extra revenue from fuel sales, as opposed to having to subsidise before, falling crude oil prices also means less profits for Petronas, the national oil corporation.

Income from Petronas, in terms of petroleum tax and dividends, accounted for about 40% of the latest national budget. Latest results showed Petronas made a net profit of RM42.7bil in its fiscal first half ended Sept 30.

This was 46% higher compared to same period last year. It would be tough to match that level of profitability during the current six-month period ending March 31, 2009.

Sha’ani said while Fomca and consumers were agreeable that petrol sales results in more revenue for the Government, they should be told how their money is spent.

He said the profits from petrol must be channelled in such ways to further reduce the burden of consumers and help them cope with the cost of living especially in the current financial downturn.

He added that the fuel pump price should not be lowered further as it would only encourage more private vehicles on the roads and fewer people would take public transportation.

He said the Government must make it a priority to greatly improve public transportation and educate the public to use it as their main mode of transportation.

“People need time to change their transportation arrangements,” he said.

On Nov 25, Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad was asked if the situation now was akin to consumers subsiding the Government.

He replied: ‘’The Government collects taxes. It is government revenue. When the price is high, the Government gives subsidy.’’

On Wednesday, he said, consumers would know next week if the Government will implement a floor price mechanism for petrol and diesel.

He said consumers should also brace for the decision of having a managed flotation mechanism for oil prices based on market rates.

Shahrir said many aspects had to be looked into before finalising the issue, including generating revenue for the Government and providing stronger purchasing power to consumers.