DAP: Allow fuel retailers to discount fuel

In Malaysian Fuel Prices / by /

Fuel-Wallet GaugeDAP gave a pretty good suggestion earlier this week with regards to how petrol and diesel is priced in Malaysia. They’ve suggested that fuel retailers in Malaysia be allowed to compete to offer the best prices at the pump.

The government can easily set a ceiling price for fuel according to the average price of fuel or however they’ve been determining it currently, but stations should be allowed to sell fuel lower than that if they want to. The whole idea is that some companies could run their business more efficiently and translate the savings to people, or even decide to just reduce the profit they make on each litre of fuel in hopes of selling more litres. Competition could be beneficial for consumers.

Some countries are like this this, for example Australia and the USA where prices could be different between various retailers and locations. The first step would be to allow such discounting to actually happen, then we have to wait and see if any of the fuel retailers are willing to become the “Digi” of their industry and offer aggressive attractive pricing to pull more users over.

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Paul Tan

After dabbling for years in the IT industry, Paul Tan initially began this site as a general blog covering various topics of personal interest. With an increasing number of readers paying rapt attention to the motoring stories, one thing led to another and the rest, as they say, is history.

 

Comments

  • AI-generated Summary ✨

    Comments largely support the idea of allowing fuel retailers to discount fuel, highlighting potential benefits such as increased competition, consumer savings, and market efficiency, especially in urban areas. Several comments note that similar systems work well in countries like the US and Taiwan, suggesting consumers will benefit from lower prices and more choices. However, there are concerns about the practicality and long-term sustainability, including the risk of cartels, monopoly formation, and limited benefits in rural areas. Skeptics also believe the government and major companies may resist such changes due to existing profits and market control. Overall, most comments are optimistic about the idea but emphasize that its success depends on proper regulation and implementation. Sentiments are generally positive with some cautious notes.

  • charles27 (Member) on Dec 05, 2008 at 3:17 am

    smart idea… sokong..

    somemore petronas at newspaper already say earn how many billions this years alone..”Tak untung konon… ” … its good if can see them offering lower price than competitor.

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  • kucau (Member) on Dec 05, 2008 at 3:21 am

    bijak! hopefully gov will accept this suggestion.

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  • shooter (Member) on Dec 05, 2008 at 6:03 am

    I’m all for it, but since the suggestion came from the opposition camp, there is no way in hell the G will accept it, no matter how good it is.

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  • feis (Member) on Dec 05, 2008 at 6:16 am

    Petronas total cash now could only cover the national debts for less than 3 years IIRC. Now that the crude price is lower, the profit will most probably be lower too.

    Some time ago, fuel retailers did have some discount ‘system’. However, as I understand it, the cost of the ‘discount’ had to be covered by the station operators. The operators naturally oppose it.

    Given the profiteering nature of Malaysian business, anybody think it will succeed without govt intervention? Even the hypermarkets needs some small nudge from the govt to start their pricewars. Fuel price is lower now but prices of goods mostly remained the same as when the petrol price was RM2.70.

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  • abtm (Member) on Dec 05, 2008 at 7:13 am

    good idea and only the public can win, but u’ll have many ppl driving pass 4-5 stations looking for the cheapest price…lets hope no one runs out of fuel before they find the cheapest one

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  • atrash (Member) on Dec 05, 2008 at 7:18 am

    Well, i’ve seen those idea in real life in Germany.
    2 fuel stations, which are only about 1km apart offer difference fuel price. But sometimes people still go to the expensive one due to no jam, nicer service etc.

    Hope G will consider this idea. It looks good for customers.

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  • tricycle (Member) on Dec 05, 2008 at 7:20 am

    Paul and everyone,
    Here is where one could compare the price of gas in the US at any state or any region, just type in the zip code. http://www.automotive.com/gas-prices/index.html

    Too bad the national average of gas in the US now is lower than us, they are paying USD1.78 per gallon ( a gallon = 3.78L and 1USD=3.65MYR). So they are paying about RM1.72 per liter. An oil net importing country is paying lower than us. What the F!

    And that is the national average in the US, in some other places, the gas price is in fact a lot lower than that. Just imagine how our G is screwing us with the price floor and other stupid suggestions.

    Yes we had the discounting system some time ago. But it was opposed by the ministry, because they think it is unwise for Malaysian to have better standard of living. If I’m not mistaken the decision was under the ruling of TDM, ( the full of shit PM). Always remember this: In 1998 he said Soros is the one to blame for what happen to our currency, then in 2006 he said Soros is not the one to be blamed. Is he not full of shit?

    Prices of goods will come down, lets just wait for it. Tepung, gula, cooking oil are still very expensive. So we have to wait for this price to come down to reflect the slowing down of economy. It will take time. Who’s fault that push the price up? Never in any country increase the price of gas by about 40%. It was silly thing done by silly G.

    On the G not having money to do unnecessary luxurious projects and other bail outs, let it be. The G should learn to manage the country resources more efficiently. Even if the PR takes over the G, they too will have to prove that they will able to manage the country efficiently. If not after 4 years, people will pull them down. So lets watch and see.

    Source: Malaysiakini, CNN, google

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  • Mavmanuel (Member) on Dec 05, 2008 at 7:31 am

    with thier full blown ego and opposite interest; we can only hope.

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  • lambov12 (Member) on Dec 05, 2008 at 8:15 am

    Good !

    Come on Pakatan Rakyat, take over the G …

    we r waiting for that …

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  • jeffchoo (Member) on Dec 05, 2008 at 8:18 am

    Let me start off with, it’s a great idea. We do have it in Australia and it does lead to some pretty interesting situations whereby ocassionally one retailer will have a massive sale…. but due to the way our stations are positioned since we are very spread out in population, this can often place an extreme amount of stress on a single station and result in extremely long queues which can piss off the locals.

    Another interesting situation which arose was the petrol cycle whereby if you knew when the petrol tankers (i.e. the trucks carrying petrol) were due to arrive, you’d also know that the retailer would be trying to empty out as much of their petrol reserves around that time so that they can take on the maximum amount of new fuel (to minimise the per L transportation costs and so on) and hence you could wait until this time to fill up, but this also causes long queues on certain days of the week.

    The worst thing which can result, but may not arise if there is a price ceiling as suggested, is collusion. Basically this is where retailers agree on set prices and then when one tries to break away such as a local petrol station, the rest all lower their prices to the point where it’s at a loss just to kill off the other petrol station from operating. To prevent this in Australia, some states initiate a fuel watch program whereby stations/retailers can only adjust prices overnight and must set their prices upfront through an internet website as this reduces the chance that retailers will keep changing the prices continuously during the day to copy whatever the nearest petrol station was doing.

    Finally, the most recent (well not so new nowadays) development is fuel stations making deals with grocery store chains (I’d imagine it’s like Giant or Tesco equivalent?) where basically if you spend more than a certain amount at the grocery store, you get a discount coupon for 4c off any petrol upto 150L at the corresponding chain of petrol stations (e.g. Coles/Bilo/KMart supermarkets with Shell petrol stations, Woolworths with Caltex). This encourage people to spend just a little bit more at shops to get over the $30 requirement and then the group/companies can spread the additional profit to cover the additional cost from discounting the petrol. WHo knows, this may even pop up in Malaysia?

    In terms of price variation, what I’ve noticed here in Sydney is that in certain suburbs (typically those which are less wealthy), there is much cheaper petrol, sometimes around 5-10c aussie. Note that our 91RON is around $1.16-$1.30aud per L at the moment.

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  • moha774 (Member) on Dec 05, 2008 at 8:24 am

    Dream on…. FYI fuel retailer have their own association to begin with, do you think they want to compete with each other for more costumers by selling cheaper than others? let say gov. put a ceiling price of RM3.00/Litre… and they (the association members) made a concensus to sell at RM2.80/L and no body are going to sell cheaper, who will be at loss?? Talk is cheap… the current system is good enough but can still be rectified since the price should have been even lower than RM1.80/Litre..

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  • ob8 (Member) on Dec 05, 2008 at 8:28 am

    consumers in msia imo will choose cheaper price petrol due to the lower buying power. i bet petronas can compete in this case as the company is well involve in external market conditions and competitions etc. the idea will benefit consumers the most i think. paul no topic on proton – mitsubishi jv on new waja and small hatchback?

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  • droll (Member) on Dec 05, 2008 at 9:02 am

    i can see it now – someone’s going to come up with a price watch monitoring service and make millions out of it. LOL.

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  • scottloeb (Member) on Dec 05, 2008 at 9:09 am

    Pity the rural/kampong folk. no competition, the retailer will fix the price at maximum (ceiling) price, with excuse like long distance, low volume, evaporation rate very high to recover and such. Later, all oil co will form cartel and trying to squeeze as much profit as possible from the retailer (worst than now) and the retailer will be left with very little margin, they will retaliate and pack together again another cartel and monopoly. If really want to be an open economy, just open it up. follow the market price.

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  • dzat46 (Member) on Dec 05, 2008 at 9:20 am

    Excellent idea…competition is always gud for the consumers…

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  • jeffchoo (Member) on Dec 05, 2008 at 9:34 am

    Market price is more likely to leave consumers open to exploitation and this has negative impacts on government. For example if in the above example the rural petrol station raises prices to extreme amount to compensate for additional costs, the customer may simply choose to drive less. As a result of driving less, they spend less on other things such as eating out, or even going to work which slows the economy as a whole reducing government taxation revenue.

    moha774- whilst I can see where you are coming from, when given the opportunity to lower prices, it’s been seen in many economies whereby it encourages retailers to be more efficient. For example, how many times have you been to a restaurant and seen many staff members standing around doing nothing? You are actually paying for their wages to stand there in your meal price which has a sufficiently large margin built in. In essence, you are subsidising them. I know this example is not perfect but apply it to the petrol station whereby there are wasted resources such as unnecessary signage, extra (unutilised) staff, etc… and now if the petrol station wants to still continue to attract customers from other service stations, they too will need to match the lower costs and higher efficiency in order to sell petrol at the same price. After all, petrol is considered a homogeneous good (i.e. doesn’t really matter who you buy from) so the only real way to compete in this field is on price.

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  • mangkuk (Member) on Dec 05, 2008 at 10:09 am

    Tq jeffchoo. Now i get it.
    Sometimes, when i heartily to fulfill my needs, i forgot the others n lazy to think outside the box.

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  • n8cky (Member) on Dec 05, 2008 at 10:30 am

    Then the whole state will set up a community to have a meeting and discuss a same discount rate, or you’ll need to cross the state for a better price. Come ‘on, this happened in the states some times ago, and ends up different prices on different states, that’s it. Then the states’ petrol kiosk community/ or board of states’ petrol kiosk(eg. KL board of petrol kiosk/ whatever stupid name they want) will set up an entry barrier for incomers so others’re unable to start a new petrol kiosk business in that particular state, or you’ll enjoy higher rate in these states.

    Guess what? that particular states’ citizen will then monopolized by these idiot board of whatever thingy, unless you’re willing to travel out of state to have your ‘discount’, which sounds like 1cents-2cents difference to me.

    Yet, it only works and fair enough for the citizen if the ceiling price is set fair enough. If the ceiling price is set way too high, sorry to say you’ll need to queue or run over state for a cheaper price.

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  • n8cky (Member) on Dec 05, 2008 at 10:31 am

    Then the camerons’ will cry out loud since they only have 3 kiosk on the main valley. Exactly same case.

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  • n8cky (Member) on Dec 05, 2008 at 10:41 am

    lol…something flash of my mind when i was thinking there’s a big big machine on kiosk’s roof top indicating current price offered, red summore..lol

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  • nyte_skater (Member) on Dec 05, 2008 at 10:53 am

    damn brilliant idea.

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  • greenwaja68 (Member) on Dec 05, 2008 at 11:05 am

    it is good idea especially in big town such as kl but not in small towns where the number of stations limited. But one thing, for small number of players in market, they can do ‘cartel’ like OPEC.

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  • ALPINA Burkard Bovensiepen GMBH + Co. KG (Member) on Dec 05, 2008 at 11:24 am

    yea, should be like those hypermarkets, got competition, until crazy low prices

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  • mangkuk (Member) on Dec 05, 2008 at 11:33 am

    Yup.. verrry brilliant idea n good for us in Klang Valley.
    Juz like n8cky said, i believe price for Klang Valley is cheaper than Kelantan or Kedah or Sabah or else.
    Kesiannyer.
    Fair uh?

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  • ReactiX (Member) on Dec 05, 2008 at 11:37 am

    “moha774 said,

    December 5, 2008 @ 8:24 am

    Dream on…. FYI fuel retailer have their own association to begin with, do you think they want to compete with each other for more costumers by selling cheaper than others? let say gov. put a ceiling price of RM3.00/Litre… and they (the association members) made a concensus to sell at RM2.80/L and no body are going to sell cheaper, who will be at loss?? Talk is cheap… the current system is good enough but can still be rectified since the price should have been even lower than RM1.80/Litre..”
    “scottloeb said,

    December 5, 2008 @ 9:09 am

    Pity the rural/kampong folk. no competition, the retailer will fix the price at maximum (ceiling) price, with excuse like long distance, low volume, evaporation rate very high to recover and such. Later, all oil co will form cartel and trying to squeeze as much profit as possible from the retailer (worst than now) and the retailer will be left with very little margin, they will retaliate and pack together again another cartel and monopoly. If really want to be an open economy, just open it up. follow the market price.”

    Agreed. malaysian people like to take advantage on situations. opportunist i must say. when theres ceiling price, they tend to sell at the ceiling. no way they sell much lower than that. even if its lower, by 5 cents isnt make much difference. just look at the price on poultry. even the G set the ceiling price, there are less people sell much lower price than the ceiling. some more sell even at higher price. above all, even when theres competition on the fuel price, if the consumer goods price are not affected, its not all worth it. Goods still sells at the 2.70 petrol price. for me, it is a not a wise idea by the opposition. every nation treat their fuel price by their own way. its case by case. dont compare apple to banana.

    but hell yeah, G need to reduce the price as their promised, dont delay the price drop. when the price spikes, they raise it sharply without thinking twice. when price drop, they delay it and reduce little by little. Baka!

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  • Xx- Ferrari -xX (Member) on Dec 05, 2008 at 12:05 pm

    That’s why…. This clearly shows how the opposition PR and bleedy hell BN thinks….. Chase em’ out on da next election !!!!! Vote for PR !!!! Give them’ a chance to proof it !!!! sure worth it !!!!

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  • biggie (Member) on Dec 05, 2008 at 12:32 pm

    To me this shows how shallow the opposition is. In fact I regret putting my X in the wrong box in the last general election. DAP keep on making populist statement like this but full of hidden agenda.

    This unfortunate business will drove all the small retailers out of business (similar to what hypermarket are doing). And the consumers are left without choice later on. It does happens in few areas in UK/US who is at the mercy of walmart/hypermarket. The farmers/producers are squeezed so tight that many close shop.

    Not to mention that for rural areas the price of fuel is very high (no competition). In the next electiuon state like Sabah and Serawak might simply vote to get out of Malaysia.

    The retailers make only 6-8 cents per litre… so who will bore the discounts? Ppl who got volume. And as it is retailers who got volume (have more then one station) are the connected ones. Is this a scheme by DAP to make cronies rich?

    If you let the distributors (shell/mobil/esso/petronas) do the discounts then who will get profit at the end.. as we all know that these company got their petrol from the same source at the same price.

    Currently there are indirect discounts through point/loyalty system. Its good for the masses as it is. May be the G need to react faster to market movement, although the downward is good now… but will ppl want the same if the trend is upward?

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  • fadlee (Member) on Dec 05, 2008 at 1:15 pm

    wow.. at the time when DAP make a statement they just take it as the most brilliant idea.. if govt sure kena all the bash.. haha what a pathetic people..

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  • ericfoong81exe (Member) on Dec 05, 2008 at 1:27 pm

    Good idea finally, at the end consumer is the winner. Same policy as Taiwan, different petrol station have the right to offer different prices. As i know the most higer different is RM0.19/L in Taiwan few weeks ago.

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  • Jomo (Member) on Dec 05, 2008 at 1:28 pm

    biggie said,
    December 5, 2008 @ 12:32 pm

    To me this shows how shallow the opposition is. In fact I regret putting my X in the wrong box in the last general election. DAP keep on making populist statement like this but full of hidden agenda.

    This unfortunate business will drove all the small retailers out of business (similar to what hypermarket are doing). And the consumers are left without choice later on. It does happens in few areas in UK/US who is at the mercy of walmart/hypermarket. The farmers/producers are squeezed so tight that many close shop.

    Not to mention that for rural areas the price of fuel is very high (no competition). In the next electiuon state like Sabah and Serawak might simply vote to get out of Malaysia.

    The retailers make only 6-8 cents per litre… so who will bore the discounts? Ppl who got volume. And as it is retailers who got volume (have more then one station) are the connected ones. Is this a scheme by DAP to make cronies rich?

    If you let the distributors (shell/mobil/esso/petronas) do the discounts then who will get profit at the end.. as we all know that these company got their petrol from the same source at the same price.

    Currently there are indirect discounts through point/loyalty system. Its good for the masses as it is. May be the G need to react faster to market movement, although the downward is good now… but will ppl want the same if the trend is upward?

    _____________________________________________________________

    I support you….Sabahans always neglected. This discounted methods is useless in Sabah. What a silly suggestions by the oppositions.

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  • dr_carz (Member) on Dec 05, 2008 at 3:27 pm

    silly politician who forgets sabah and sarawak!

    are we not malaysian?

    bahhh….

    hate DAP : Family bussiness only..

    Long live Lim’s

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  • jeffchoo (Member) on Dec 05, 2008 at 3:29 pm

    Whilst the differences may be minimal, that’s what will keep all stations in business. However it is the small discounts which will keep people repeatedly going back to the same store and building loyalty. As people have posted above, the smaller stations may not be able to compete but the reality is, they should be able to remain competitive and if they aren’t, then that’s the way a market economy works. People who are willing to travel interstate for a small saving will prove that a lower price is what people want and they are willing to put in the effort to get it.

    So in conclusion;
    a) Government needs to set a very fair price ceiling- perhaps the current price point will be a good start?
    b) Whilst there is the possibility the stations will gang up and form cartels, the government ceiling price will keep them from exploiting customers. In other words, whilst prices may not drop much, at least they won’t rise.
    c) If the stations choose to keep it at the ceiling price, economics dictates that those who are willing to take a smaller profit and/or become more cost-effective will start to open up their own petrol stations. Look at any petrol station where there are spare bowsers (i.e. pumps not in use)- this is wasted, underutilised capacity which could be made use of. Until a petrol station maximises it’s utility (very rare to ALWAYS have someone using the petrol pump), it should always aim to increase it’s sales revenue and lower it’s cost base/expenses.

    With regards to the US prices- keep in mind that their economy works slightly different to the rest of the world due to government subsidisation of petrol and stockpiling of oil. That is, when oil is cheap, the government buys a lot and saves it for when there’s a shortage and then gradually releases it to keep prices low and the economy going.

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  • tiadaid (Member) on Dec 05, 2008 at 4:24 pm

    I went to the post office today and realised that the fuel rebate of RM625 is still going on! No wonder the G is reluctant to reduce oil prices any further. But if we stop it, then those car owners who haven’t claimed their rebates will cry foul. Damned if they do, damned if they don’t.

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  • Chedet.Com (Member) on Dec 05, 2008 at 4:35 pm

    Org2 yg tdk bsyukur i2 adalah org2 yg tdk rs ssh.Knp hrs banding dgn negara2 maju?Apa taraf Malaysia nak lwn dgn negara2 maju?Ckp psl USA,UK,Australia.I2 kroni2 USA 2.Bsyukurlah dgn apa yg ada d negara ni sbb,org2 batu api byk skrg ni.It’s more politacal gimmick rather then a good idea.Org blk2 slhkan kjaan tp,org tdk sdr yg mereka hdp skrg ni because of the Goverment.Knp org negara asing blh bangga dgn Malaysia dan jdkan Malaysia role model dlm byk aspek?Adakah sbb idea2 brilliant@sbb tindakan yg mybbkan negara ini trs maju ke hadapan?Be grateful with what you have then your life will be better.Klu dok complaint ja tp,usaha teda apa gna?Jgn dok complaint ja.Ni dok complaint ja keja,b’usaha la klu mau hdp yg lbh bgs.I2 lbh bgs dr kritik ja.Org yg tau kritik tp,usaha teda sm la dgn tin kosong.

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  • scottloeb (Member) on Dec 05, 2008 at 4:57 pm

    How mature is our market? look at poor Mazda. Good car, good value, good price but people still flock to buy crappy Vios. We are sentiment based, we are not very good at arguing, and rarely agree to disagree and now we want to go open the price and in the end collapsing the economic foundation that we already built? This proposal will be resulting in killing the rural folk (happens already in pedalaman East Malaysia where the diesel retailer sell at exorbitant price due to those excuse) and now we promote this ceiling price later it will become just like chicken. And then some idiot will cut the supply when the price goes down causing more trouble. To be exact, I prefer it to remains as it is. Revise upwards or downwards according to market price is ok (with the 30 cent tax or subsidy). The APM is just right at this point of time.

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  • autojohndoe (Member) on Dec 05, 2008 at 5:52 pm

    same with scottloeb…

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  • Jomo (Member) on Dec 05, 2008 at 6:10 pm

    Sabahan and Sarawakian always neglected, west Malaysian never even care about us, they just know complaining about their cars and all that (tak tahu bersyukur langsung)…poor Sabahan and Sarawakian. How I know this? because I’m Sabahan and I know how poor we are. Sigh….

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  • Prem3377 (Member) on Dec 05, 2008 at 11:51 pm

    wow…

    i read all the comments here..i feel so happy reading each and every comment today…wonderful and brilliant..some spoke about the good side of it and some spoke about the negative impact of the system…

    this is how paultan.org should be…no one simply bashing BN or DAP but everyone is coming up with informative informations..good good..keep it up guys…

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  • csv (Member) on Dec 06, 2008 at 12:44 am

    its a good idea no doubt. but because it’s from DAP, you think our friends from BN will really consider it immediately?

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  • 9166 (Member) on Dec 06, 2008 at 3:58 am

    Our G is too dumb to implement such a system. Simple adjustments based on floating prices also cannot cope. I am doubtful that they will come up with some complicated matrix system in a hurry. you just watch and see.

    Likely to happen is for the G to say “the council decided to fix a floor price” and when the crude does go sky high again, the council will meet again. This time they will tell us “if we start subsidising the rakyat, the country will go bankrupt”.

    Plain predictable textbook reaction from the G.

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  • jeffchoo (Member) on Dec 06, 2008 at 4:28 pm

    I can see your point there scottloeb and agree that in some instances, if prices went down, someone will cut supply. However you have to keep in mind that the market for oil and petrol is in a totally different league to normal goods and services. It’s similar to a share market in the sense that the market price (at least theoretically!) should be exactly the equilibrium between what is able and willing to be supplied, and what is able and willing to be demanded (i.e. people are willing to pay). This is important because if the price falls, it doesn’t mean people will be refusing to supply but rather, it means that there is either an excess level of supply or an insufficient level of demand. Other thoughts such as people hoarding the fuel until the prices rise again may work on a very small scale (e.g. the retailer around the corner doing so) but of course this is not sustainable on a large scale because with prices low, demand will go up, and naturally as the quantity of fuel available declines, the price will rise again.

    Whilst I sound like I am very strongly supporting this system, I cannot guarantee it will work. It’s just that in the long term, it is important and essential for there to be a floating price without ceilings or floors. With floors, the government hinders the market and with ceilings, the government may be disincentivising people to start new business. On the upside with the ceilings, it is less likely to lead to collusion and cartel type behaviour, but there is no real benefit for introducing floors. If there are competitors who are willing to and able to sell the petrol at such a low price, then it clearly indicates that they are more efficient and the competitors should also be able to match this level of efficiency. Before you say “this is going to kill the other competitors and when they are gone, the prices will go up again”, also keep in mind that when prices drop that low, demand for that particular petrol station will skyrocket causing long queues- and thus other stations which sell it at a higher price (and assuming same level of efficiency/costs, a higher margin) are thus earning a premium by enabling customers faster access to the petrol pump. This sounds rather farfetched right? It’s just like the cornerstore 7eleven versus going to your Giant/Tesco. One has convenience and timeliness whilst the other has lower prices (choice doesn’t matter since petrol is considered homogeneous and the same regardless of where you buy from). Therefore you have paid a premium for your time (i.e. you can calculate how much you are willing to pay for each second of your time).

    As for 9166’s comment, it’s just like when countries fix their currency. It’s only sustainable (from the government’s perspective; not the citizens) if the government is undervaluing their currency and building up foreign reserve stockpiles. When doing the reverse and holding up the value of an overvalued currency, the government eats into it’s reserves and eventually the government/country may be bankrupt.

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  • 9166 (Member) on Dec 07, 2008 at 1:57 am

    Now why would a government undervalue their own currency while building their foreign currency reserves? Wouldn’t it cost the goverment more money to acquire the foreign currency? Strange concept.

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  • jeffchoo (Member) on Dec 07, 2008 at 2:05 pm

    9166, a government can undervalue it’s currency for a variety of reasons. Typically the most common reason is because they have an economy which is export-orientated and by undervaluing the currency, foreigners are more likely to buy the domestic goods abroad since they will be cheaper. You are correct in saying that means it costs more to buy foreign currency, but why would the government need to buy foreign currency for if they are export-orientated (i.e. they produce so much stuff domestically that they have a huge surplus which could be exported and produce profit for locals as well as drive economic growth).

    Just FYI some of the other reasons a government can undervalue it’s currency is to entice it’s citizens to buy domestic goods as foreign goods will become very expensive, it also makes the country more appealing to tourists since the foreigners can come in and spend a lot of money which boosts local economy, encourages foreign investment in domestic assets (e.g. a factory producing shoes which pays in the local currency will appear even cheaper to purchase for a company in another country), it enables the government to make a nice profit as a result (an artificially undervalued currency means the difference between “true price” and actual price is a profit which the government keeps).

    By the way, as far as I know, the only country which has pulled this off is China. China wanted economic growth and could not afford to build factories and give it’s people jobs, so by having an undervalued currency, foreigners helped out a lot with starting the economy by relocating production facilities and so forth which in turn give people jobs, build villages/towns, etc…

    Hope this helps explain some stuff :)

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  • b4nd3r (Member) on Dec 08, 2008 at 12:55 am

    Adoi .. sounds smart .. but has no patriotism at all. This is the starting point. Later on the PSC and later on the reserve control. Dah dah la tuuu.

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  • b4nd3r (Member) on Dec 08, 2008 at 1:27 am

    Owh another thing is. Without going into detail as jefchoo did, what I can foresee is that the pros and the cons are at equal level. I think towards the end (without imposing the price ceiling), there will only 2 dominant players. Shell & PETRONAS .

    It’s good expressing your ideas. Throwing complains. The least, we can improve our critical thinking. But, give laa constructive ones.

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  • jeffchoo (Member) on Dec 08, 2008 at 8:25 am

    Out of interest does anyone know if Shell and Petronas actually own and manage each petrol station or are they owned by individual citizens?

    I’m inclined to think that in the long term whilst it may move towards just a duopoly (2 companies dominating the market), it’s highly unlikely that they will be able to discount their petrol compared to the smaller competitors by so much as to make it economically viable to both knock them out of business AND be able to afford to build sufficient petrol stations (i.e. replace them all) and maintain market share without more competition coming back in.

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  • ALPINA Burkard Bovensiepen GMBH + Co. KG (Member) on Dec 08, 2008 at 8:49 pm

    i love you lim kit siang

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  • lembagatanah (Member) on Dec 09, 2008 at 9:41 am

    jefchoo, petronas and shell stations are owned by individual, but there are some petronas station owned directly by petronas. not sure the percentage/how many station.
    station owners, kaya nowadays. now 6 cents per litre, compared to 3 cents previously ;-)

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  • mits27 (Member) on Dec 09, 2008 at 9:49 am

    I love this idea, the same approach was using in US too, some gas companies always sold the cheapest gas, depends the area and depends the different gas companies…

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  • mits27 (Member) on Dec 09, 2008 at 9:51 am

    I don’t think gov will allow this because this doesn’t help local gas companies as it creates the competition…

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  • ALPINA Burkard Bovensiepen GMBH + Co. KG (Member) on Dec 10, 2008 at 12:59 pm

    long live dap

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