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Float system profits oil companies at the expense of the people, says Rafizi

Float system profits oil companies at the expense of the people, says Rafizi

The government's move to scrap the fuel subsidy and base the prices of RON95 petrol and diesel on a managed float system starting next month means that the rakyat will have to bear the extra burden of guaranteeing the profits of oil companies and petrol dealers, a PKR lawmaker said today.

Party secretary-general Rafizi Ramli said this was because under Malaysia's version of the managed float system, about 30 sen was padded into the per litre cost of petrol and diesel, which was for profits guaranteed to oil and gas companies and petrol dealers.

This covers their costs of transportation, distribution, marketing and operations and also protects them from global price fluctuations.

He said this was unlike other countries which had an open market system where the costs were only pegged to the Means of Platts Singapore or MOPS.

Rafizi said that MOPS was the price of petrol and diesel which is refined and traded through Singapore, adding that this was usually the base price taken while the rest was left to the market to determine.

"Therefore in an open market, oil companies use MOPS only, so it is up to them to undercut their competition and sell cheaper," he said.

In Malaysia, the cost of petrol and diesel was based on MOPS, but also had padded costs which amounted to another 30 sen per litre.

As such, Rafizi questioned Umno youth chief Khairy Jamaluddin's stand in defending the managed float system, asking if he was now advocating protection of big corporations at the expense of the rakyat.

"He tweeted that the price of petrol and diesel will be determined by the managed float system, as if that was the answer to all the angst and criticism and as if that justifies the removal of subsidies," Rafizi added.

He also said that Khairy's stand merely proved that the Barisan Nasional government chose to victimise the public and protect instead the interest of big oil companies, the likes of Petronas, Petron, Shell and BHP among others.

Rafizi added that if Putrajaya was going to expose the people to fluctuations of crude oil prices in the world market, it should also remove protection for the oil companies.

He said that the managed float system was the same as the automatic pricing mechanism (APM) practised in the country since the 1980s where the only difference now was the removal of subsidies for the rakyat.

He said that under the APM, while the margins of oil companies and petrol dealers were guaranteed, subsidies for the public were in place, which made it a fair system.

As such, he urged Khairy to clarify his stand in defending the managed float system.

"When he goes around town and defends the managed float system, does he mean he prefers to protect the interest of corporations and not the rakyat?

"Because the system does exactly that: not only do we have to pay the ups and downs of petrol and diesel prices but we have to guarantee the profits of oil companies as well," he added. – November 24, 2014.