Freebies fuel sales at Malaysian petrol outlets

Malaysia’s economic slowdown has forced businesses to think of imaginative ways to survive and petrol stations have been tempting customers with gifts, cheaper fuel and contests where they could win thousands of dollars.

But those who have refrained from such practices warn that the others could force them into a battle that ultimately benefits no one in the industry.

"I’m waiting for the industry to tell me whether it wants to change the rules of the game," a stern-looking Hassan Marican, president and chief executive of Malaysia’s National oil company Petroliam Nasional Bhd (Petronas), said last week.

Petronas is policy maker for Malaysia’s oil and gas industry and controls about 30 per cent of the country’s fuel market.

Hassan was miffed with EssoMalaysia Bhd, the local arm of United States’ Exxon, for giving its customers a discount of three Malaysian cents (0.75 US cent) for a litre of petrol without consulting other oil companies in the business.

The retail price of petrol in Malaysia is fixed by the government at around 1.10 ringgit a litre.

Hassan said the oil and gas industry had an informal pact on incentives they could offer customers and Petronas has kept to the deal so far.

"The understanding has been broken and it has created instability in the market," Hassan said.

He added: "As far as Petronas is concerned, we’re ready to do what needs to be done to protect our market share."

"I don’t see what else something like this could do other than force everyone into a price war," Megat Zaharuddin Megat Nor, chairman and chief executive of Shell Malaysia Bhd, said, referring to the two-week long Esso campaign.

Industry officials said the battle of the freebies started with BP Malaysia Sdn Bhd’s offer of mints, mineral water and facialtissues to motorists who filled up 30 ringgit worth of petrol at its stations.

"Our objective was just to say thank you to our customers, especially at a time like this when the whole country has to work harder," said Shalina Rosli, a spokeswoman for BP.

Just as the BP promotion wound down in April, Caltex Oil Malaysia Ltd began a contest where purchases of 20 ringgit and more could win motorists anything from a bar of soap and packet of instant noodles to a cash prize of 100,000 ringgit.

"This contest will also demonstrate our commitment to our business partners on ensuring the growth of their business, especially in light of the recent blitz of promotions by other petroleum companies," managing director Robert Gregory said.

Esso Malaysia Bhd entered the fray at the end of May and was more direct in saying it was facing up to competition with its standard discount of three local cents on fuel for all customers.

"Instead of giving a bottle of water, we’re giving money," chairman Philip Dingle toldReuters.

Officials of oil companies which have stayed away from the promotions said the profit margin for fuel in Malaysia was rather low to justify giving prizes or discounts.

"At the most, I would imagine that a dealer’s margin is around 6.3 local cents for a litre of petrol and around three cents for a litre of diesel," said Tony Fraei, director of fuel sales at Mobil Oil Malaysia Sdn Bhd.

"At margins like these, it certainly does not make it very attractive for a company to give away a bar of soap which costs more than a ringgit," Fraei said. "Ultimately, these campaign benefit no one."