Petrol prices soar 25 percent

A worker at a ‘Max’ filling station in Mingalar Taung Nyunt township pumps diesel into a car earlier this month. Pic: Kaung Htet

BLACK market petrol prices in Yangon have risen by about 25 percent over the past month, sending prices outside the country’s economic capital soaring.

In some major cities, such as Myitkyina in Kachin State, the price of a gallon (4.57 litres) of petrol has risen to K5500, while in central Myanmar the price was hovering around K4800 a gallon when The Myanmar Times went to print.

In Yangon, the petrol price rose from K3200 a gallon in early February to K3600 on March 6. On March 9 it had risen to K3800 and hit K4000 the following day, sources said, while a gallon of diesel was being sold for K3800, up only slightly on a month ago.

However, some sellers were predicting prices to fall after water festival, which concludes on April 18.

“The rise in price is a yearly occurrence as the Thingyan holiday approaches because demand is higher then, particularly from areas outside Yangon,” said one black market fuel seller in Mingalar Taung Nyunt township. (All fuel sellers interviewed for this article asked to remain anonymous.)

Private filling stations were continuing to sell subsidised fuel provided by the government for K2500 a gallon but were limiting customers to four gallons a vehicle. Long lines of cars, sometimes extending more than a kilometre, have been ever-present at Yangon’s filling stations for several months.

U Tun Win, a taxi driver in Yangon, said motorists were routinely waiting two-and-a-half hours to fill up, adding that in December it took one-and-a-half hours.

However, there were no queues for the more expensive octane petrol, which filling stations sell for K3600 – still relatively low by international standards.

The vast majority of the petrol sold to motorists in Yangon is sold onto the black market and distributed to regions of the country that have few or no filling stations, such as Pyay in Bago Region, Mawlamyine in Mon State, Sagaing in Sagaing Region and Myitkyina in Kachin State. In many towns outside Yangon the fuel price was about K4800 – almost double the subsidised pump price.

Most diesel sold in Yangon stays in the city and is used to fuel trucks and generators, one black market seller in Mingalar Taung Nyunt township said. “But some also goes to industrial centres such as Hpakant in Kachin State”, which is the country’s major jade-producing region, he said.

The owner of another medium-sized black market operation located near a filling station in Mingalar Taung Nyunt said he was purchasing about 2000 gallons of petrol a day from motorists for K3700 and on-selling the fuel at a K100 a gallon profit.

“We’re actually buying less petrol now than a month ago, I think because there are so many cars lining up so it takes longer to distribute the fuel. It could also be that there are more black market shops appearing,” said the seller, adding that one month ago he was purchasing about 2500 gallons a day.

In far-flung places like Myitkyina – which has a population of several hundred thousand, but only two filling stations – the black market purchase price for petrol hovered between K4800 and K5000, while motorists were paying up to K5500 a gallon, one resident said last week.

“The price reached K5500 two weeks ago. The price rose from about K3500 per gallon before,” the resident, a 68-year-old former Myanma Railways official, said on March 8. There were unconfirmed reports of fuel being exported to China through the Kanpaiktee border crossing, further pushing up prices in Kachin State.

In Myitkyina, the majority of vehicles are motorcycles and there as many as 1000 were lining up for fuel at each of the two private filling station each day.

“It takes four or five hours for a motorcycle to get gasoline at the subsidised price,” the resident said, adding that there were no lines at the black market shops.

A professor of political economics at the University of Massachusetts in the United States, who was visiting Myanmar last week, said the situation would benefit certain people, such as the retired and jobless who have access to a vehicle.

She described the practice as a “rent-seeking” opportunity, with people pocketing the differential between the subsidised and black market price.

“I’ve heard of one family, a mother and daughter, who were earning as much as K80,000 a day” purchasing subsidised fuel and selling it on the black market, she said. “However, this situation does not create a new product. It is wasted effort and it has an adverse effect on those who really need [fuel].”

The rise in the domestic fuel price comes against a backdrop of rising global prices. In the United Kingdom, the average price for a gallon of petrol hit a record £6 (US$9.70) on March 9, The Guardian reported last week.

Concerns over political unrest in the Middle East and North Africa have pushed oil prices to two-and-a-half-year highs of more than $100 a barrel. However, that should have had little effect on the domestic market, as prices are still being subsidised by the government – at considerable cost to the national finances.

Figures from the Central Statistical Organisation show the government spent $661.1 million on fuel imports in the first eight months of the 2010-11 fiscal year – more than in the entire 2009-10 fiscal year.

When the government privatised fuel stations across the country last year it said the sale was the first step towards prices more in line with international standards. However, it is yet to remove subsidies on fuel, which are widely employed in the region, particularly to curb inflation.

HSBC’s Asia economist, Wellian Wiranto, told news agency AFP last week that subsidies “function as a ‘dam’ to hold back price rises, and short-term consumption and longer term efficiency may not adjust”.

“This dam may also ‘break’ at some point, when the budget gets hurt too much, then the adjustment will be resultantly more shocking,” he said.