Spiral effects of Petrol Hikes

Thursday June 5, 2008 MYT 1:30:14 PM

Tenaga raises tariffs for bigger consumers

KUALA LUMPUR: Tenaga Nasional Bhd, which has received the Government’s approval to revise its tariffs with effect from July 1, will impose higher tariffs for households using more power while commercial and industrial consumers will pay more.

“Commercial and industrial consumers are expected to experience an average increase of 26%,” Tenaga said in a statement to Bursa Malaysia Thursday.

“However, low voltage commercial and low voltage industrial consumers consuming up to 200kWh per month will experience a lower average increase of 18%. This lower increase will benefit small traders, retailers, shops and eateries,” it said.

The power giant said there would be no change in tariffs for household consumers whose monthly electricity consumption is up to 200kWh. This group represents 59.1% of household consumers.

“Household consumers with monthly consumption of 201-400 kWh representing 26.7% of total households consumers are expected to experience between 1% to 10% increase in their monthly bill,” it said.

Tenaga also said the new tariff structure for domestic and household consumers was designed to encourage large users to consume electricity more efficiently.

Meanwhile, a Bloomberg report said Tenaga expected its profit to fall this year as the price increase would not be sufficient to cover all the higher fuel costs.

It said the increase in natural gas prices would raise its fuel costs by RM4.2bil a year while higher coal prices would increase its expenditure by another RM1.4bil. (The Star)

Thursday June 5, 2008

Petronas to raise selling price of gas by 187% from July 1

PETALING JAYA: Petrolium Nasional Bhd will increase the selling price of gas by as much as 187 % effective July 1. Prices of natural gas for vehicles (NGV) used by taxis and liquefied natural gas (LNG) will be kept unchanged.

Gas supplied to power producers will increase by 124% to RM14.31 per million British thermal unit (mmBtu) from RM6.40 per mmBtu.

For commercial users who use less than 2 mmscfd (million standard cu ft per day), there will be a 161% price increase to RM24.54 per mmBtu from RM9.40 per mmBtu where those who use more than 2mmscfd will pay 187% more at RM32.56 per mmBtu compared with RM11.32 per mmBtu before. However, special assistance will be given to users of Gas Malaysia Sdn Bhd in the small and medium enterprises category, who will face a smaller increase in gas rates. (The Star)

Thursday June 5, 2008

Analysts: Transport counters affected

PETALING JAYA: Analysts expect transport counters on Bursa Malaysia to be negatively affected by the fuel price hikes announced yesterday but believe the inflationary impact would send ripples through all market sectors.

Areca Capital Sdn Bhd CEO Danny Wong told StarBiz he was more worried about the total effect on all sectors.

“Transport yes, but everything (all market sectors) would be affected,” he said.

He also said that it was certain that transport companies would end up bearing higher costs although the amount would depend on how much they could pass on to clients.

If airlines and maritime companies were also considered transport related counters, these were already exposed to global market fuel prices, he added.

The overall inflationary impact, he said could affect these stocks as well.

On the plus side, Wong said raising fuel prices would reduce the smuggling of petrol, which was causing subsidy leakage.

KSC Capital director of research Choong Khuat Hock said the main concern for transport stocks would be whether the companies could pass through the price hike to customers.

“All domestic haulage costs should go up,” he said.

Choong said any listed counter exposed to domestic haulage costs, including logistics companies that focused only on international transport, would be affected.

These companies include Integrated Logistics Bhd and Konsortium Logistik Bhd, which will be directly affected.

Choong said national shipping corporation MISC Bhd had a haulage business as well, but its contribution was not significant to the group's earnings.

He said the “whole inflationary impact” from all inputs, including a probable rise in staff costs, would cause “a major impact”.

One possible impact would be haulage companies switching to lorries of European make with diesel engines that give almost 30% better mileage than other models.

Meanwhile, Malaysian Automotive Association president Datuk Aishah Ahmad said if the oil hike was across the board, people would need to reconsider purchasing cars and this would have an impact on higher capacity cars.

“The fuel hike will also affect food prices. When traffic charges go up, everything goes up,” she added.

On the total industry volume forecast, she said the first half was on track, “but we may need to review our forecast for the second half.''

If the oil hike was just on RON97 fuel, then it would mainly affect the high-end cars, she said, adding: “The masses should remain unaffected.”

Aseambankers head of research Vincent Khoo told StarBiz the impact would be detrimental to inflation and the economy, taking into account not just a petrol/diesel price increase, but also other measures like an increase in electricity tariff.

“Transporters are also likely to face a sharp slowdown in demand apart from higher costs,” he pointed out. (The Star)

Thursday June 5, 2008

The impact of higher fuel cost

NEWS ANALYSIS
By YEOW POOI LING

MALAYSIANS today are bracing themselves for a hike in petrol and electricity tariffs that will send prices skyrocketing; and a bigger hole in their wallets.

Since most expected the fuel hike to be effective in August, it came as a nasty shock to learn that the Cabinet meeting yesterday decided the 41% and 63% increase in petrol and diesel prices would take effect today.

Tenaga Nasional Bhd (TNB), having to pay more for gas now, is allowed to raise electricity tariffs by 18% for residential premises and 26% for companies from July 1.

Meanwhile, planters have been slapped with hefty windfall taxes as the cooking oil cess is now abolished. Independent power producers (IPPs) are also now subject to a windfall tax.

Coupled with increases in food prices, the higher cost of energy would have a huge knock-on effect on prices of goods.

Although the Government indicated that inflation might rise to 4% to 5% this year, the real inflation effect could be considerably larger.

Malaysia's petrol prices were deemed among the lowest in the region, average salaries are not among the highest.

“These are drastic moves, which would lead to erosion in consumers' disposal incomes and sentiment turning cautious,” said Bank Islam Malaysia Bhd senior economist Azrul Azwar.

He said consumers were likely to cut back on travel and vacation, and eating out in restaurants and hold back spending on “big ticket items” like property and cars.

Since consumer spending supported the gross domestic product (GDP) growth in the last couple of quarters amid the softer external environment, the moderation in consumption would hit the economy, Azrul said.

Sectors like retail, consumer, property and automotive would also be negatively impacted, he added.

While it remains to be seen how the windfall taxes would benefit the rakyat, Azrul suggested that the monies from IPPs be used to subsidise the cost of producing electricity so that TNB would not have to raise tariffs.

As inflation was driven by rising cost and not demand, it would be a tough call for Bank Negara to curb the pressures, he said.

“I hope the central bank would not increase interest rates as it would affect the economy and consumer spending further,” Azrul added.

Meanwhile, an industry observer said the Government's measures were “too much, too soon” as even before the people could come to terms with the recent surge in food prices, their purchasing power has been further eroded.

“They (these measures) could have been staggered to ease the people's burden,” he said.

Also, instead of imposing windfall taxes, the Government could have encouraged the companies to use the profits to increase productivity, which would trickle down into the economy.

“It's not the companies' fault that their margins improved because of better prices,” he added.

On a positive note, an industry player said: “At least there will be more demand for kap cais (small motorcycles) and motorbikes now!” (The Star)

Thursday June 5, 2008 MYT 4:43:58 PM

Lorry operators in northern states increase rates by 35%

By YENG AI CHUN

BUKIT MERTAJAM: Lorry operators in the northern states on Thursday increased their rates by about 35% following the fuel price increase.

Persatuan Perkhidmatan Pengangkutan Lori (Bahagian Utara) Malaysia president Lee Far Li said they needed to increase their rates as the price of diesel had gone up from RM1.58 a litre to RM2.58.

“The RM1 increase would eat up 35% of our operational cost. We have no choice but to increase our rates. Otherwise, we cannot continue with our services,” he said.

The association, an affiliation of Pan Malaysian Lorry Owners, held a meeting Thursday to discuss the fuel hike and made an announcement on their new rates.

Lee said the association would monitor the situation and if there was another fuel price increase in the next few months, it would review its rates again.

“We would need to adjust according to the situation.”

Lee explained that a trip from Butterworth to Kuala Lumpur, depending on the delivery material, can cost between RM1,000 and RM1,200. With the increased rates, it would now cost between RM1,350 to RM1,550 per trip.

The association has 100 members with about 2,000 lorries from Penang, Kedah and Perlis. The lorries are used to transport general cargo and building materials.