Falling Fuel Prices Have No Effect on Gov’t Pumps

By MIN LWIN

Despite a dramatic decline in world oil prices in recent months, Burma’s government-run gas stations continue to sell at rates set in August 2007, when a sudden hike in fuel costs triggered major protests.

According to business sources in Rangoon, government pumps now charge 400 kyat (US $0.35) more than the black market for a gallon of diesel and 300 kyat ($0.27) more for a gallon of gasoline.

The official price of diesel is set at 3,000 kyat ($2.70) per gallon, while gasoline costs 2,500 kyat ($2.20).

“I am amazed that the government hasn’t changed the official price,” said a Rangoon-based businessman, noting that diesel now sells for just 2,600 kyat ($2.30) a gallon on the black market, while gasoline costs 2,200 kyat ($1.95).

Prior to an unannounced decision to slash subsidies in August 2007, a gallon of diesel cost 1,800 kyat ($1.60) and a gallon of gasoline sold for 1,500 kyat ($1.33). The price of compressed natural gas (CNG) increased fivefold.

In May 2008, black market prices spiked at 7,000 kyat ($6.20) for a gallon of diesel and 6,000 kyat ($5.30) for a gallon of gasoline as a result of the devastation wrought by Cyclone Nargis, which struck the country on May 2-3.

In response to the disaster’s impact on businesses, the regime authorized the formation of a Diesel Committee to ensure that companies operating heavy equipment had adequate access to fuel at reasonable prices. The committee set the price of gasoline at 4,500-5,000 kyat ($4.00-4.40) a gallon and diesel at 4,600-5,200 kyat ($4.10-4.60).

Although official prices at state-owned gas stations remained unchanged, access was limited to just two gallons a day.

In late August 2008, the regime allowed government-run gas stations to sell unlimited quantities of diesel and gasoline for Foreign Exchange Certificates (FECs) at market-determined prices. Diesel now sells for 2.60 FEC and gasoline for 2.40 FEC (an FEC is officially equal to one US dollar, but is valued at less than that on the black market).

The manager of a government-run gas station confirmed that kyat prices for fuel remain unchanged, despite cheaper prices on the black market. “We are still selling at the official price,” he said, adding that quantity restrictions are also still in place.

Despite artificially high prices, government gas stations still provide fuel to members of an association of private bus operators, who are required to purchase a fixed quantity at the official rate every day.

In August 2007, the sudden rise in fuel prices had an immediate impact on bus fares, and was especially hard on people with low incomes commuting to the city for work. This prompted small-scale protests and set the stage for much larger demonstrations in September.

In early 2008, The Myanmar Times, a semi-official weekly, reported that the government had undertaken a partial liberalization of Burma’s energy market by allowing Myanmar Economic Holding, Ltd and Htoo Trading Co, Ltd to import fuel.

However, economic analysts dismissed the move as “fake liberalization,” noting that Myanmar Holding, Ltd is owned by the military, while Htoo Trading Co, Ltd belongs to Tay Za, a close associate of leading figures in the ruling junta.