Oil marketing cos, dealers jockeying for more profits

KARACHI - Oil marketing companies and dealers of oil products are jockeying for building up excessive stocks ahead of certain increase in the diesel prices on May 31 mid night amid acquire more and more profits.

Analysts in oil sector are predicting a rise of Rs4-6 per litre in diesel prices in next three days which will increase the profits of the OMCs sector astronomically.

Their profits will be more if they had a big stock at their disposal on May31 mid night.

The petroleum dealers association is also aiming to reap a wide margin of profit from the coming increment of the diesel prices if they had a big stock to sell to their consumers, who are expected to rush to the outlets before the prices of diesel revise upwardly.

Recently OMCs and Petroleum Dealers Association held a number of meetings in which the oil companies refused to increase the quota of supply as demanded by the dealers.

One of the examples of tussle between OMCs and dealers for gaining more profits from the expected increase in the diesel prices is the recent decision of Pakistan State Oil (PSO) in which the company had capped the supply of diesel to petrol pumps across the country.

However, Pakistan State Oil (PSO) has assured Petroleum Dealer Association that its recent decision regarding countrywide capping of its diesel supply to pumps would not lead to dry up their petrol pumps.

PSO has decided to maintain the diesel quota in coming days in accordance with the diesel quota recorded 24 days ago, President of Petroleum Dealer Association Abdul Sami Khan said.

Soon after the decision was taken by the PSO on Wednesday to cap the diesel supply, the members of Petroleum Dealer Association held a meeting with the management of PSO.

Khan said that they had demanded increase in the diesel quota owing to high demand caused by unprecedented load shedding across the country.

Sami said that but the management of the PSO has turned down their demand, only given assurance to not get their petroleum pumps dry out.

Dealers told The Nation that all the petroleum companies have already cut the supply of diesel to the pumps, they added companies are providing only 40 per cent of their total demand.

They rejected the perception that when it is being expected that Oil and Gas Regulatory Authority (OGRA) is about to increase the prices of petroleum products, the dealers starting dumping petroleum products to get more benefits.

Dealers claimed that they are not intentionally creating shortage of petroleum products at petrol pumps rather petroleum companies reduce the supply of diesel, seeing the dates of revision of oil product prices by the OGRA. Sources said that oil companies take the full advantage from the increase in the oil prices, while dealers have not sufficient capacity to dump the oil products a head of increase in oil prices, hence the margin of benefit is suppose to good for nothing.

On the one hand dealers showed their concern that recent decision of PSO will pave the way for shortage of diesel at petrol pumps.

on the other hand PSO has claimed that recent decision will counter the artificial sales pressure.

OGRA fixes local oil product prices for next 15 days, while the next revision is due on May 31, 2008 based on average international oil prices prevailing last 15 days.

With hike in diesel prices in international oil markets, pressure is building on the new government as its diesel subsidy could increase to Rs34 per liter approximately Rs15 billion per fortnight effective June 01, 2008 from currently Rs28 per liter approximately Rs12 billion per fortnight, analysts said.

Another worrisome factor is the depreciating rupee against the dollar which has also triggered diesel price increase in the local currency.

Compared to last fortnight, average rupee value against dollar has fallen by more than 4 per cent, analysts added.

Analysts believe government has no option but to pass on the impact of rising diesel prices to end consumers. If diesel price increases, it will be positive for OMCs, especially Shell and PSO as their per liter diesel margins will improve.