Energy Technology Expert

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

Hi Marcial,

Actually, percent margin on DPLC and peso margin per liter are both valid and needed measurements.

From the viewpoint of oil companies, percent margin on DPLC maybe useful for internal use depending on their specific objectives, such as determining the profitability of oil imports on an annualized basis under currently prevailing oil import prices. It may also be of interest to government regulators.

However, from the viewpoint of government regulators who have to use a measurement readily understandable by laymen–motorists, transport groups, and the commuting public–peso margin per liter is the easiest to understand.

For example, when I buy Petron gasoline, at that point I don’t know from which crude oil shipment of varying FOB prices per barrel did it come from in the Petron Bataan oil refinery. I don’t know either the corresponding DPLC, as well as the percent margin depending on the amount of DPLC.

However, if the margin is expressed in pesos per liter–say P5 per liter–which is more or less firm over an indefinite period unless adjusted by government regulators for justifiable reasons, I will know that every time I buy gasoline from any service station–Petron, Shell, etc.–regardless of the gasoline price per liter, whether P30 or P50 per liter, P5 per liter of what I pay goes to the oil company as profit. This way, it is easier to understand the oil industry pricing. It is also easier to curb any oil company overpricing because there is a previously established and accepted standard peso margin per liter which should be maintained.

Let us hope the government comes up with a pricing system that is fair and equitable to both the oil industry and the buying public.

Thanks for reacting to my email.

Mar

P.S.  As a result of these exchanges, Marcial Ocampo wrote a suggested procedure for calculating oil pump price and determining oil company profitability and may be found in these links:

http://energytechnologyexpert.com/oil-and-gas/oil-crisis/how-to-calculate-oil-pump-price-and-determine-oil-company-profitability-–-a-suggested-procedure-for-government-regulators-and-oil-companies/

There are instances that the product MOPS and exchange rate (FOREX) changes, then a procedure for calculating accurately the oil price adjustment is found in this link:

http://energytechnologyexpert.com/oil-and-gas/oil-pump-prices-oil-and-gas/how-to-calculate-oil-price-adjustments-given-changes-in-product-mops-and-foreign-exchange-rate/