08/08/05 - THE recent increase in the price of fuel is set to have a highbearing on the transport sector and industry players view the hike withconcern.

The hike may make or break the shipping industry, said Jardine ShippingServices general manager Thum Hoong Yip.

'Looking at ship operations, the main cost to run a ship is the fuel,other than vessel charter rates," he said, adding that the price of fuelwhich was increasing at a phenomenal rate would have a very big impact onthe transportation chain on the whole.

Last week, the Government announced new fuel prices, with petrol price upby 10 sen a litre, diesel 20 sen a litre and the retail price of liquefiedpetroleum gas (LPG) was also up by five sen per kg.

This increase came just over two months after the May 5 increase.

"As in many instances, the increase will have a domino effect," he said,adding that the Fuel Adjustment Factor (FAF) should be increased intandem.

He said the fuel increase would be passed back to the users and ownerswould try to recover through the FAF, now being implemented by shippinglines and the airlines.

"This trend will become more prominent so long as there is fuel priceincrease and the FAF will also need to be increased," he said.

He said the FAF could vary for areas, with different baskets of formulae.

He said certain countries with bunker oil had their own rates andcurrencies were also contributors.

"This is the way forward, increase the FAF. No service provider cancontinue to absorb the fuel increase and this is perhaps true for localland bridge transporters " hauliers, bus operators, conventional lorryoperators and the like,” said Tham.

He said bunker fuel price for example, was now US$200 (RM760) per tonneand it was only half the price less than a year ago while diesel was atUS$500 (RM1,900).

"Obviously, these costs are a very big element for ship operations," hesaid, adding that in order to survive, operators would essentially have topass it on to the users.

Selangor Freight Forwarders and Logistics Association president Tan AhBeng said although the effect was not immediately felt, forkliftoperations would definitely be affected by the fuel price increase.

"Although forklift operations depend on supply and demand, diesel is usedfor the operations," he said.

Tan said individual operators would now have to rethink their cost ofoperations and services.

"Forklift operations are heavily carried out at private warehouses andports and on the whole, this would cause a huge change in the country’seconomy," he said.

Tan however, said no complaints had been received to date but noted thatwhatever, one used more, one would have to pay more.

Shipping is an international business and bunker fuel is one of the maincosts in ship operations, said Malaysian Maritime Institute (Ikmal)president Capt Jaffar Lamri.

"As such, the increase in oil prices will definitely affect the shippingcost eventually,' he said.

Capt Jaffar said big players usually insulated themselves from thefluctuations of fuel price through hedging, protecting themselves for afew months until the price came back to an acceptable level.

He however, said the small players would be directly impacted if they didnot protect themselves and added that the cost would be passed on to theconsumers.

"For the benefit of the global business and community, the rise and fallof important commodities such as oil must be managed and not based onsentiments and false assumptions,’’ he said.

Capt Jaffar said the fuel price would affect the land transportationoperations cost locally and called on the Government to be careful inharping on subsidies,

"The Government must be careful on the subsidies given to the publicwithout calculating the direct and indirect benefit of the programme.

"It is important that when something is taken from the people, it must begiven back in other forms. In this case, when subsidies are reduced andcost of living is increased, the Government must consider the reduction ofincome tax," he said.

Capt Jaffar said since Malaysians paid the actual prices of servicesprovided there was no need for a heavy tax levy.

ABX Express (M) Sdn Bhd, a local courier company, reported that it wasplanning to increase its service fee following the recent fuel priceadjustment.

ABX operations manager Wan Mohd Kamal said since the fuel price increaselast year, the company had neither implemented any adjustment on itsservice fee nor imposed a fuel surcharge to its customers.

"Our country’s courier operational cost has increased up to 20% due to thehike.

"Since last year there have been three fuel price adjustments and it isburdening our operational cost and most of our ABX vehicles uses diesel,"he said.

He said the issue of imposing a surcharge or revising their service feewould be a major topic of discussion at the Association of MalaysianExpress Carriers (Amec) next meeting.

"We are not taking advantage of the situation to make profit but with theescalating price of fuel there is nothing we can do to keep ouroperational cost low,' he said.

He said all the other transportation companies one way or the other haveadjusted service fee or imposed a surcharge to keep with the fuel priceincrease but until now courier services has not done anything.

He said the government should seriously look into alternative fuelresearch such as developing palm oil as a fuel substitute for vehicles.