OMCs and oil dealers benefit from high global prices

High rates of petroleum products in the international market has turned out as a blessing for oil marketing companies (OMCs) and dealers whose margin went up by 40 percent during July 2004 to 2005.
A report on petroleum products prices, made available to Business Recorder, indicated that OMCs' margin of profit on MS sales in July last year was Rs 1.29 per litre which due to high prices in the international market went up to Rs 1.71 per litre in July 2005.
One litre MS price in July 2004 was Rs 36.92 but unprecedented surge took it to Rs 48.94 in July 2005. Likewise, prices of HOBC went up to Rs 54.33 in July 2005 from Rs 40.87 of July last year and kerosene prices raised from Rs 24 in July 2004 to Rs 29.53 in July 2005, high speed diesel and light diesel oil prices went up to Rs 27.84 per litre in July 2005 from Rs 21.05 of July 2004.
Similarly, the rate of margin of OMCs on HOBC increased from Rs 1.43 per litre in July 2004 to Rs 1.90 per litre in July 2005. The situation is almost the same in the case of increase of OMCs' margin on sale of other petroleum products.
The report said OMCs' margin of profit on kerosene oil increased from Rs 0.84 in July last year to Rs 1.03 per litre in July this year. Likewise, their profit margin on high-speed diesel and light diesel oil also increased during the last one year, according to the report, from Rs 0.73 per litre to Rs 0.97 per litre.
The dealers are another party who were the beneficiaries of the high rates of petroleum products.
The report mentioned that dealers' margin of profit on MS in July 2004 stood at Rs 1.47 per litre and went up to Rs 1.95 per litre in July 2005. They were getting Rs 1.63 per litre profit on HOBC in July 2004 and when oil prices went up their profit on the same product for one litre ultimately went up to Rs 2.17.
The report however, shows zero profit for dealers on kerosene and high-speed diesel/ light diesel oil. This could be due to two reasons. Either its concealed intentionally so that the volume of profit margin could be kept at some lowest level or that the government might be paying margin to the dealers on these products without mentioning it in the report.
The formula of proportionate margin on rates is providing a golden opportunity to the OMCs and dealers to have exorbitant profit/ margin on petroleum products sale, and they will keep on enjoying this ideal opportunity as long as the formula remains in existence.