How to predict oil price adjustments from changes in MOPS and FOREX – a simplified formula

How to predict oil price adjustments from changes in MOPS and FOREX – a simplified formula

Yes, your favorite energy technology and pricing expert has simplified the calculation of oil price adjustments given changes in product MOPS and FOREX since not all the minor cost items change.

The duty paid landed cost inclusive of 12% VAT on imported oil, in $/bbl is:

DPLC $/bbl = (CIF + WHARFAGE + BOE FEE + OCEAN LOSS + DOC STAMPS + DEMURRAGE + CUSTOMS DUTY + SPECIFIC TAX) x 1.12

where FOB = MOPS + PREMIUM (where PREMIUM is usually zero) More »

THE CASE AGAINST OIL DEREGULATION : IT PROVOKED HIGHER PRICES – by Mar Tecson

THE CASE AGAINST OIL DEREGULATION:

IT PROVOKED HIGHER PRICES

[Editor’s Note:  This is the first article on this series that is meant to elicit discussion among our readers on how best we could address the issue of oil pricing under a deregulated environment.  Are we better off today with a deregulated oil industry or should we revert back to a regulated oil industry?   Has deregulation brought the country benefits or allowed the oil companies to increase their prices beyond what is reasonable?  Please feel free to comment and share your views so we could draw up a consensus on a better approach to oil industry regulation.  Cheers.  Marcial] More »

THE CASE AGAINST OIL DEREGULATION – Mar Tecson’s Comment #5

THE CASE AGAINST OIL DEREGULATION – Mar Tecson’s Comment #5

[This is Mar Tecson’s comment to Marcial Ocampo’s response/comment #4.  The reader may add further his views to widen our pool of ideas.  Cheers.  Marcial]

From: Marcelo Tecson <martecson@yahoo.com>

Subject: IT DEPENDS ON WHOSE VIEWPOINT… Re: LET US USE BOTH PROFITABLITY MEASUREMENTS… Re: PER LITER MARGIN is Gateway to PERCENT RETURN on CAPITAL… Re: DEREGULATION AFFECTS MARGIN ONLY… Re: THE TEST OF DEREGULATION IS ON PER LITER MARGIN… Fw: Re: For CEBU C… THE CASE AGAINST OIL DEREGULATION/Let’s oil ourselves More »

THE CASE AGAINST OIL DEREGULATION – Mar Tecson’s Comment #4

THE CASE AGAINST OIL DEREGULATION – Mar Tecson’s Comment #4

[This is Mar Tecson’s comment on Marcial Ocampo’s comment #4.  The reader is advised to add his comments to this blog.  Cheers.  Marcial]

Marcial Ocampo’s response is found in these links:

http://energytechnologyexpert.com/oil-and-gas/oil-crisis/the-case-against-oil-deregulation-–-marcial-ocampo’s-comment-5/

http://www.energyblogs.com/GlobalEnergyNewsandEconomics2009/index.cfm?mode=entry&entry=202A0565-1372-574A-8C6EAE86D63D4E82

From: Marcelo Tecson <martecson@yahoo.com>

Subject: LET US USE BOTH PROFITABLITY MEASUREMENTS… Re: PER LITER MARGIN is Gateway to PERCENT RETURN on CAPITAL… Re: DEREGULATION AFFECTS MARGIN ONLY… Re: THE TEST OF DEREGULATION IS ON PER LITER MARGIN… Fw: Re: For CEBU C… THE CASE AGAINST OIL DEREGULATION/Let’s oil ourselves: Friday, October 2, 2009, 12:48 PM More »

THE CASE AGAINST OIL DEREGULATION – Mar Tecson’s Comment #3

THE CASE AGAINST OIL DEREGULATION – Mar Tecson’s Comment #3

[This is Mar Tecson’s comment to Marcial Ocampo’s response / comment #3 also.  Please add your own comments and suggestions to our ideas.  Cheers.  Marcial]

Marcial Ocampo’s response may be found in these links:

http://energytechnologyexpert.com/oil-and-gas/oil-crisis/the-case-against-oil-deregulation-–-marcial-ocampo’s-comment-4/

http://www.energyblogs.com/GlobalEnergyNewsandEconomics2009/index.cfm?mode=entry&entry=2027F8DC-1372-574A-8C6589DA48D9D0F9

From: Marcelo Tecson <martecson@yahoo.com>

Subject: PER LITER MARGIN is Gateway to PERCENT RETURN on CAPITAL… Re: DEREGULATION AFFECTS MARGIN ONLY… Re: THE TEST OF DEREGULATION IS ON PER LITER MARGIN… Fw: Re: For CEBU C… THE CASE AGAINST OIL More »

THE CASE AGAINST OIL DEREGULATION – Mar Tecson’s comment #2

THE CASE AGAINST OIL DEREGULATION – Mar Tecson’s comment #2

[This is Mar Tecson’s comment to Marcial Ocampo’s response / comment #2.  The reader is encouraged to share also his views to supplement our ideas.  Cheers.  Marcial]

Marcial Ocampo’s response may be found in these links:

http://energytechnologyexpert.com/oil-and-gas/oil-crisis/the-case-against-oil-deregulation-–-marcial-ocampo’s-comment-3/

http://www.energyblogs.com/GlobalEnergyNewsandEconomics2009/index.cfm?mode=entry&entry=201FDC43-1372-574A-8CC2C15B883418B7

From: Marcelo Tecson <martecson@yahoo.com>

Subject: DEREGULATION AFFECTS MARGIN ONLY… Re: THE TEST OF DEREGULATION IS ON PER LITER MARGIN… Fw: Re: For CEBU C… THE CASE AGAINST OIL DEREGULATION/Let’s oil ourselves More »

THE CASE AGAINST OIL DEREGULATION – Mar Tecson’s comment #1

THE CASE AGAINST OIL DEREGULATION – Mar Tecson’s comment #1

[This is the first response from Mar Tecson on Marcial Ocampo’s comment #1.  Cheers.  Marcial]

Marcial Ocampo’s response may be found from these links:

http://energytechnologyexpert.com/oil-and-gas/oil-crisis/the-case-against-oil-deregulation-–-marcial-ocampo’s-comment-2/

http://www.energyblogs.com/GlobalEnergyNewsandEconomics2009/index.cfm?mode=entry&entry=201BEB0B-1372-574A-8C1E067D48AD0432

From: Marcelo Tecson <martecson@yahoo.com>

Subject: THE TEST OF DEREGULATION IS ON PER LITER MARGIN… Fw: Re: For CEBU C… THE CASE AGAINST OIL DEREGULATION/Let’s oil ourselves More »

How to calculate oil price adjustments given changes in product MOPS and foreign exchange rate

How to calculate oil price adjustments given changes in product MOPS and foreign exchange rate

In a deregulated regulatory framework such as in the Philippines, price adjustments on a weekly basis are being implemented by both the three oil majors (Petron, Pilipinas Shell and Chevron/Caltex) and minor industry players (Flying V, Sea Oil, Total, Jetti, Unioil, Eastern, PTT, etc.).

Such adjustments are implemented by each company since the main price determinant of domestic oil prices in the Philippines has shifted to the small incremental volumes brought in by the minor industry players having product inventories of 1-2 weeks only, as opposed to previous crude oil inventories by the two remaining refiners (Petron and Pilipinas Shell) of around 1-2 months of crude.

Product imports are based on the Mean of Platts Singapore (MOPS) which track all major oil trades in the Asian Region while crude oil imports are based on the Dubai crude marker price which tracks all major crude oil exchanges in the Asian and Indian ocean economies.

In my previous blog on oil pricing, the author has presented the step-by-step procedure for calculating domestic price by simply following the oil supply chain: More »

How to calculate oil pump price and determine oil company profitability – a suggested procedure for government regulators and oil companies

How to calculate oil pump price and determine oil company profitability – a suggested procedure for government regulators and oil companies

Finally, your energy technology and pricing expert, Marcial Ocampo, has proposed this action plan to top government officials in the executive and legislative branch of the Philippine Government thru email.  Marcial is hoping that positive action will be accorded to this proposal in order to bring closure to this nagging issue.

This pricing concept with a financial analysis of the oil industry profitability is expected to bring greater understanding on how oil prices should be calculated and imposed on the buying public to ensure that the common interest of the oil supplier and oil consumer are both equitably addressed.

Calculating pump price (cost model)

This paper proposes a transparent procedure for determining domestic pump prices given the MOPS price for imported oil products or DUBAI crude oil price for oil refiners.

The calculation of oil company margin (the portion of the pump price that goes to the oil company since the other costs are pass-thru expenses given to the supplier of oil products, government taxes and other participants in the oil supply chain) is also presented.

I believe that oil company margin based on % of duty paid landed cost (DPLC = FOB + FRT + INS + OCEAN LOSS + DOC STAMPS + BOE FEE + WHARFAGE + DEMURRAGE + CUSTOMS DUTY + SPECIFIC TAX + VAT1) is the most equitable way of providing reasonable returns that could be readily agreed upon by the regulator and oil industry participants. More »

THE CASE AGAINST OIL DEREGULATION – Marcial Ocampo’s comment #5

THE CASE AGAINST OIL DEREGULATION – Marcial Ocampo’s comment #5

[Editor’s Note: Finally, Marcial Ocampo proposed this action plan to top government officials in the executive and legislative branch of the Philippine Government thru email.  Marcial is hoping that positive action will be accorded to this proposal in order to bring closure to this nagging issue.  Let’s pray to that.  Marcial]

From: Ocampo Marcial <mars_ocampo@yahoo.com>

Subject: Fw: IT DEPENDS ON WHOSE VIEWPOINT… Re: LET US USE BOTH PROFITABLITY MEASUREMENTS… Re: PER LITER MARGIN is Gateway to PERCENT RETURN on CAPITAL… Re: DEREGULATION AFFECTS MARGIN ONLY… Re: THE TEST OF DEREGULATION IS ON PER LITER MARGIN… Fw: Re: For CEBU C… THE CASE AGAINST OIL DEREGULATION/Let’s oil ourselves

Dear Readers and Fellow Citizens,

Just sharing with you our continuing discussion on oil deregulation with Mar Tecson.

I believe that oil company margin based on % of duty paid landed cost (DPLC = FOB + FRT + INS + OCEAN LOSS + BOE FEE + CUSTOMS DUTY+ SPECIFIC TAX + DEMURRAGE + VAT1) is the most equitable way of providing reasonable returns that could be readily agreed upon by the regulator and oil industry participants.  VAT1 refers to the 12% VAT applied on the imported oil value adding activities. FOB is the MOPS for products and DUBAI for crudes.

The DPLC is then converted to Pesos per liter given the exchange rate (PhP/US$) and conversion factor from barrels to liters (42 gal/bbl x 3.7854 liters/gal) = 159 liter/bbl approximately. More »

THE CASE AGAINST OIL DEREGULATION – Marcial Ocampo’s comment #4

THE CASE AGAINST OIL DEREGULATION – Marcial Ocampo’s comment #4

[Editor: This is Marcial Ocampo’s response to Mar Tecson’s comment #3. Reader is also advised to contribute his views and comments to enrich further this discussion.  Cheers.  Marcial]

From: Ocampo Marcial <mars_ocampo@yahoo.com>

Subject: Re: PER LITER MARGIN is Gateway to PERCENT RETURN on CAPITAL… Re: DEREGULATION AFFECTS MARGIN ONLY… Re: THE TEST OF DEREGULATION IS ON PER LITER MARGIN… Fw: Re: For CEBU C… THE CASE AGAINST OIL DEREGULATION/Let’s oil ourselves

Hi Mar,

I fully agree with you that in the end, the measure of profitability is the % return on capital which is the ratio of sales volume x margin / capital used in providing the product to the market.

Let’s take the case of a sari-sari store.  He buys goods and adds 10% gross margin.  If he is able to sell his product within a week, his annual return is 10% x 52 weeks/year = 520% per year assuming he reinvest all his capital and earnings and does not withdraw capital or earnings for his upkeep.

In the case of an oil company, if each delivery of product measured as DPLC (FOB + FRT + INS + DUTIES + SPECIFIC TAX + VAT + DEMURRAGE + BOE FEE + OCEAN LOSS) the oil company applies a 3% gross margin, and the oil major has an inventory turnover of 1 month, then his annual gross return is 36% per annum, which he has to budget to pay for his loans, salaries, expenses and capital expansion projects. More »

THE CASE AGAINST OIL DEREGULATION – Marcial Ocampo’s comment #3

THE CASE AGAINST OIL DEREGULATION – Marcial Ocampo’s comment #3

[Editor’s Note: The reader may wish to add his comments to that of Marcial Ocampo on the previous comments by Mar Tecson.  Cheers.  Marcial]

From: Ocampo Marcial <mars_ocampo@yahoo.com>

Subject: Re: DEREGULATION AFFECTS MARGIN ONLY… Re: THE TEST OF DEREGULATION IS ON PER LITER MARGIN… Fw: Re: For CEBU C… THE CASE AGAINST OIL DEREGULATION/Let’s oil ourselves

Hi Mar,

I don’t agree with you that the margin should be monitored in pesos per liter.  What if it doubled from 2.00 to over 5.00 per liter.  It is meaningless unless you also specify how much has the duty paid landed cost (DPLC) of the product or crude has moved also.

So it is important to compute the ratio of margin to DPLC as a % which is similar to % of sales since the amount of capital initially put up to bring the product to our shores is the DPLC.

I own a lending investor company and I measure my margin as a % of my loans receivables, which is similar to an oil company too.  Their receivable is basically the DPLC which they advanced in order to bring the product to us. More »

THE CASE AGAINST OIL DEREGULATION – Marcial Ocampo’s comment #2

THE CASE AGAINST OIL DEREGULATION – Marcial Ocampo’s comment #2

[Editor’s Note: This is my response to Mar Tecson’s 2nd comment.  Cheers.  Marcial]

From: Ocampo Marcial <mars_ocampo@yahoo.com>

Subject: Re: THE TEST OF DEREGULATION IS ON PER LITER MARGIN… Fw: Re: For CEBU C… THE CASE AGAINST OIL DEREGULATION/Let’s oil ourselves

Hi Mar,

This is precisely what my oil calculation model could do.

Given the source / supply cost and exchange rate and other cost factors, and comparing with the actual pump price, my cost model will calculate thru goal seek the actual oil company margin in Pesos per liter and as a % of the duty paid landed cost.

I have monitored the % oil company margin over the last few years when supply and demand was in equilibrium, i.e. all the oil industry players are receiving their fair share of the cost inputs plus their usual profit margins.

Now as we monitor current prices and compare with current international oil prices and exchange rate, the cost model will calculate the actual oil company margin in Pesos per liter and the actual % oil company margin and we then compare it with the historical % oil company margins that they oil company were enjoying prior to the oil crisis of 2008 (i.e. 2007 annual average) when it was generally agreed that there were no outstanding over and under recoveries. More »

THE CASE AGAINST OIL DEREGULATION – Marcial Ocampo’s comment #1

THE CASE AGAINST OIL DEREGULATION – Marcial Ocampo’s comment #1

[Editor’s Note:  This is the expert’s 1st response to the first article on this series that is meant to elicit discussion among our readers on how best we could address the issue of oil pricing under a deregulated environment.  Are we better off today with a deregulated oil industry or should we revert back to a regulated oil industry?   Has deregulation brought the country benefits or allowed the oil companies to increase their prices beyond what is reasonable?  Please feel free to add more comment and share your views so we could draw up a consensus on a better approach to oil industry regulation. Cheers.  Marcial]

From: Ocampo Marcial <mars_ocampo@yahoo.com>

Subject: Re: [CebuPolitics] For CEBU C… THE CASE AGAINST OIL DEREGULATION/Let’s oil ourselves

Dear all,

Kindly visit my website that explains how domestic oil pump prices are calculated and adjusted by the oil companies in response to changes in the world market price (MOPS for finished products importers and Dubai for crude refiners), foreign exchange rate (PhP/US$), freight, insurance, customs duties, specific tax, value added tax, oil company margin, biofuels, oil depot costs, transshipment/barge/shipping, hauling, dealer’s margin, etc.

A careful price build-up will show that both price changes and absolute pump price estimation closely approximate the prevailing retail price at the pumps in response to changes above. More »

The Big Three Oil Company Depots Allowed to Stay in Pandacan – says Manila Mayor Alfredo Lim

The Big Three Oil Company Depots Allowed to Stay in Pandacan – says Manila Mayor Alfredo Lim

In today’s 29 May 2009 edition of Philippine Star “Lim allows oil depot to stay” as the Manila Mayor Alfredo Lim signed yesterday (May 28) a new city Ordinance 7177 that will allow the Big Three (Petron, Shell, Chevron/Caltex) oil companies to continue operating the Pandacan Oil Terminal complex as well as other industries in the city to stay, despite apprehension over possible terrorist attacks and accidents.

Mayor Lim signed city Ordinance 7177, which amends Ordinance 8027 creating Medium and Heavy Industrial Zones, as residents and supporters of the retention of the Pandacan Oil Terminal cheered the signing. (The previous Manila Mayor and now Environment (DENR) Secretary Lito Atienza and his Manila Council then passed Ordinance 8027 reclassifying the Pandacan area as residential zone from its previous industrial zone classification.) More »

The Big Three Oil Company Depots Will Be Allowed to Stay in Pandacan? – pros and cons

The Big Three Oil Company Depots Will Be Allowed to Stay in Pandacan? – pros and cons

In yesterday’s issue of Philippine Star dated 27 May 2009 captioned “Lim to allow oil depots to stay in Pandacan?”, it appears that Manila Mayor Alfredo Lim is set to sign a controversial Ordinance 7177 (reclassifying Pandacan as industrial zone) allowing the oil depots to remain in Pandacan following an unprecedented meeting at the Petron Corporation oil depot complex which was attended by no less than President Gloria M. Arroyo, cabinet officials and oil company executives.

The meeting was held at the ground floor of the Petron Pandacan Terminal while GMA was presiding a Cabinet meeting two floors above.  The ground floor dialogue was attended by Cabinet members headed by Executive Secretary Eduardo Ermita, Trade & Industry (DTI) Secretary Peter Favila, Defense (DND) Secretary Gilbert Teodoro, Environment (DENR) Secretary Lito Atienza, Energy (DOE) Secretary Angelo Reyes, Labor (DOLE) Secretary Marianito Roque and Transportation (DOTC) Secretary Leandro Mendoza. More »

The Ultimate Commuter Vehicle Concept – electric regenerative renewable

April 30th, 2009 7 Comments   Posted in electric cars, oil crisis

The Ultimate Commuter Vehicle Concept – electric regenerative renewable

In the recent automotive show in New York, visitors commented that “why only now are the big three motors of USA offering energy efficient compact vehicles after receiving massive government budget support?” Some commented that “have they not seen the writing on the wall several years back when the Japanese and other European car makers have started to include advanced technologies that provide greater fuel economy?” Finally some said “had the US car manufacturers and American consumers invested in fuel-efficient vehicles, the world oil price would have not soared to such $147 per barrel heights, the world would have avoided a global recession, and this global meltdown woud not have happened at all”

I guess these are all speculative, but it is never too late to do the right thing –> build fuel-efficient cars, save money on fuels, conserve oil so as not to drive its price upward, clean the environment and avoid global warming, and so on.

My concept of the ultimate vehicle consists of the following:

1) A small engine, perhaps of lawn-mower size, be it a spark-ignition, compression ignition or fuel cell, to drive an energy efficient electric generator (both prime mover engine and generator should be of best design and highest efficiency).

2) The electric generator charging an array of batteries of the best storage technology. The prime mover engine turns on only when the voltage of the battery pack goes lower than its set point.

3) The batteries drive the energy efficient electric motors or drive shafts on each wheel (either 2 wheel or 4 wheel drive).

4) The 4 wheels of the vehicle should be of such design that it has minimum rolling resistance, the vehicle itself is lightweight and made of composite materials that make it both strong but lightweight.

5) During day time, the batteries are primarily charged using solar PV cells, or in the absence of adequate sunlight and the voltage drops, the small engines cut in to drive the generator to charge the batteries.

6) When the vehicle is parked and there is no sunlight, it is charged using small wind vanes that could be deployed and retracked from the car’s ceiling.

More »

How to Get Out of this Global Economic Meltdown – a suggested approach

How to Get Out of this Global Financial Meltdown – a suggested approach

Oil Crisis, US Recession and Global Financial Meltdown

As early as 2007, signs of economic recession have been observed throughout the world. By end December 2007, the international price of crude oil went past $100 per barrel. Continued speculation in the world markets as well as increased demand pushed the price to its maximum of $147 per barrel by July 2008.

From then on, it was a roller coaster ride and the price of crude oil dropped to $40-50 per barrel as off April 2009. US Banks and financial institutions began to request for US government bailout, some were allowed to fail, and the big US insurers and banks that were considered too big to fail were recipients of bailout funds from the outgoing Bush administration.

With the onset of the new Obama administration, the US legislature together with the US executive passed fiscal stimulus package to address and hopefully arrest the continued global financial meltdown that also ravaged Europe and major industrial economies in Asia.

Some Countries Were Spared. Why?
More »

Energy Technology Expert – my expertise and services

Where to Get Assistance for Energy & Electricity Investment Opportunities in the Philippines

Marcial Ocampo provides a blog on issues and concerns regarding current and future fuel cycles and power generation technologies as they affect the environment, fuel supplies and power generation capacities, efficiency of utilization of fuel or energy resource, pollution & greenhouse gas emissions, and cost of power (overnight capital cost $/kW) and energy (levelized $/kWh).

He provides market, technical and economic feasibility studies and prepares project finance models for determining asset value (bid price), levelized price of energy or electricity, or equity returns (DCF IRR).

He is also familiar with investment opportunities in the Philippine energy and electricity sector (Philippine Energy Plan, Power Development Plan) and the regulatory framework (EPIRA and RE laws,  implementing rules and regulations, Distribution Code, Grid Code) for purchasing a power plant from PSALM/NPC or for putting up a new power plant (conventional, fossil or renewable).

He can guide you in securing incentives under the latest Philippine Renewable Energy (RE) law and its implementing rules and regulations (IRR).

In addition, he could guide you in securing the needed endorsement from the Philippine Department of Energy (DOE), permits and licenses from the Energy Regulatory Commission (ERC) and other government agencies (DTI, SEC, BIR, DENR, EMB, NWRB, PNRI, DOLE, NTC, BOC, PPA, ATO, PDEA, BOI, NCIP and LGUs) in order that the facility is duly licensed to operate as a power generation facility with an electricity tariff that is the “best new entrant” for the given location and application in order to balance the need of the customers for affordable electricity and the need of the investor to meet its investment return criteria.

Should you need assistance in preparing a project finance model and a feasibility study (market, technical, economic, financial) using Philippine oil, energy and electricity data, please don’t hesitate to contact Marcial.

email:    mars_ocampo@yahoo.com   and   energydataexpert@gmail.com

tel/fax: (632)-932-5530 More »

“Is the Oil Price Right?”

March 20th, 2009 3 Comments   Posted in oil and gas, oil crisis, oil pump prices

Are Domestic Oil Pump Prices Transparent and Reasonable?

Introduction

The worldwide phenomenon of frequent rise and fall of the international price of crude oil and its roller-coaster effect on the domestic price of petroleum products have brought about the need for a transparent and predictable price adjustment mechanism in order to protect the overall interest of the consuming public, petroleum dealers, oil refiners, importers and marketers of oil-based products.

During period of supply and price stability, the international price of crude oil and finished products is fully reflected in domestic pump prices with all the participants in the supply chain (importers, insurers, refiners, marketers, shippers, haulers and dealers) receiving their fair share of logistics costs and margins, and the government likewise receiving mandated customs duties, specific taxes, wharfage fee, BOE fee, value added tax (VAT) on imported oil and added services. More »