The recent announcement that a new weekly fuel ceiling price mechanism will be introduced in Malaysia next month hasn’t gone down well with the Petrol Dealers Association of Malaysia (PDAM). News reports indicate that the association is unhappy with the move, which it said will not benefit consumers in the long run.

Its president Khairul Annuar Abdul Aziz said the association was against the government’s decision to set a ceiling price for fuel, Sin Chew Daily reported. He told the publication that the government did not hold a dialogue with dealers and operators about the matter, and that the association was only informed of the decision before the announcement was made.

He added that he would not be surprised if petrol dealers protest and demonstrate against the new measure, which he said will likely lead to a price war and possibly result in smaller players closing shop because they were not able to compete.

“If the ceiling price is set weekly, large companies with sound financial ability will be able to sell at lower prices over a long period of time, and other companies may not be able to compete at all. Eventually, a handful of large companies will monopolise the market,” he stated.

Khairul said the move will have a significant impact on petrol station operators, China Press reported, as translated by The Sun. He said that profit margins of petrol station operators have reduced in recent years following the government’s decision to remove fuel subsidy, resulting in many closing shop, and the upcoming move will likely see more of this happening.

He added that the new measure may not necessarily benefit consumers, especially in rural areas, as petrol retailers will stick to the ceiling prices announced by the government due to fewer stations and less competition in these places.

“There may only be one petrol station every 10km in the kampung, but there are as many as five of them every 5km in urban areas. Some of them will close shop due to vicious competition if operators are allowed to sell lower than the ceiling prices. The move may be a good measure to allow consumers to know what has been determined by the association, but it will have a negative impact on both consumers and operators in the long run,” Khairul explained.

On Saturday, minister of domestic trade, cooperatives and consumerism (KPDNKK) Datuk Hamzah Zainuddin said that the ceiling price for fuel in the country will be announced weekly – on the Monday or Saturday of each week – starting from April. Fuel retailers can then decide to either follow the ceiling price, or set them lower, he explained.

The PDAM’s current stance is very different than its view on the matter in the past. It has long suggested a move to weekly price updates for fuel, going back as far as December 2015. Back then, it was said that the current monthly system could cause them (fuel retailers) to incur heavy losses, and that weekly price updates (of smaller fluctuations) would not be “too noticeable” for motorists.