Assessing Factors Influencing Petroleum Prices Essay

Saturday, January 22, 2011. Met for the first clip yesterday, the Petroleum Pricing Committee, which replaces the Automatic Pricing Mechanism ( APM ), has revised upward the monetary values of crude oil merchandises. The monetary value of gasoline increased from Rs 44, Rs 70 to 48, 50 litre. Giving an addition of Rs 3, 80. The monetary value of Diesel goes, he, of Rs 35, Rs 50 to 39, 90 litre. An addition of Rs 4.40.

The monetary value of gasolene import costs merely Rs 21, 33 litre. However, several tonss add to the monetary value, including excise responsibility ( Rs 10.80 ), the hedge ( Rs 3 ), the part of the Road Development Authority ( Re 1.85 ), the part to the subsidies on rice, flour and Gas Appliances ( Re 1.50 ). As for Diesel, its import monetary value is Rs 21, 48. Strike responsibilities are imposed Rs 3.30, the hedge ( Rs 3 ), the part to the Road Development Authority ( Re 1.75 ), the part to the subsidies on rice, flour and Gas Appliances ( Re 1.50 ).

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The authorities proposes to put up a Price Stabilization Account to guarantee greater stableness in monetary values of crude oil merchandises. This Will Be The Cardinal Elementss In The Start Of The New Petroleum Pricing Committee to replace The Automatic Pricing Mechanism. This will be the cardinal component in the start of the new Petroleum Pricing Committee to replace the Automatic Pricing Mechanism.

This fund will supply for floors and ceilings higher or lower monetary values. Harmonizing To The convergence of information available, The Price of crude oil merchandises Would Stay Unchanged “ during the periodical, The diminution in universe Price Is Less than 7 %. Harmonizing to the convergence of information available, the monetary values of crude oil merchandises would stay unchanged during the period, the diminution in universe monetary values is less than 7 %. The Mechanism Provides aussi thats the upper limit Should Be bead around 10 %. The mechanism besides provides that the maximal bead should be around 10 %.

Monetary values of crude oil merchandises could be increased to a maxi A¬ Dendranthema grandifloruom of 15 %. Any addition below 5 % would non be passed on to clients with financess available in the Price Stabilization Account. In the absence of liquidness in the Stabilization Fund, the addition in retail monetary values will be a upper limit of 15 % regardless of whether the universe monetary value has exceeded 15 %.

The first meeting of the Petroleum Pricing Committee, which meets a upper limit of four times per twelvemonth, except in instances of force majeure, scheduled for this month.


Megh Pillay, le CEO de la State Trading

Corporation ( STC ), promotes transparence in the pricing of gasoline and Diesel. The mechanism is explained to the populace in a brochure trilingual – Gallic, English and Creole – free.

To defi quotidien, Megh Pillay said he had to replace the Automatic Pricing Mechanism ( APM ) by a more crystalline and stable for three chief grounds. First, several failings were identified in the NPA. Second, the constituents of the monetary value construction were non good understood. Third, the populace could non accommodate the motion of monetary values on the universe market with alterations made by the NPA.

Price diminutions followed additions month after month. Higher monetary values were still perceived A¬ me being overdone and unneeded, particularly when they were announced, while universe monetary values were worsening. Lower monetary values, meanwhile, were ever per A¬ ceived as unequal and slow in coming.

With the Petroleum Pricing Committee ( PPC ), monetary values will non alter each month, but merely when it becomes perfectly necessary A¬ sary as a consequence of significant alterations in the motion A¬ ment of monetary values on the universe market. A major aim of the new mecha A¬ me is to extenuate, if non invalidate, the effects of fluctuations in universe monetary values to retail monetary values in gas Stationss. The merchandising monetary value will be fixed for a given period, based on an mean monetary value of Platts over a twelvemonth. Platts is the planetary criterion in the field of oil.

The CIF ( Cost Insurance Freight ) is the monetary value of gasoline and Diesel costs the lands A¬ ment in Port Louis. It includes the Platts monetary value and the premium paid to the refiner ( FOB ), the monetary value paid to acquire the merchandise in Mauritius ( Freight ) and the monetary value paid for crude oil merchandises ( Insurance ). The estimated retail monetary value for the twelvemonth will be based on information on the monetary value paid for the past six months and on projections of Platts A¬ tions for the following six months.

The State Trading Corpora A¬ tion ( STC ) imports all of our demands in crude oil merchandises A¬ Liers and give them to com A¬ oil companies including Shell, Total, Chevron and Indian Oil storage and distribution. It pays for imports and is paid when it sells the merchandises to oil companies. A Price Stabilization Account will be created for each merchandise to protect the market fluctuations and monetary value fluctuations A¬. Even guarantee monetary value stableness.

Stabiliza A¬ tion of monetary values of crude oil merchandises intended to forestall dazes monthly trade good monetary values important A¬, which hampers be aftering A¬ tion in the long term all economic activities and the household budget and straight affects the state and its citizens. If the per centum diminution between the deliberate monetary value and the retail monetary value is below 7 %, there will be no alteration. A¬ If the per centum addition between the Tagus calculated monetary value and the current monetary value at retail is below 5 %, there will be no alteration in retail monetary values.

Factors act uponing monetary values

The monetary values of petro merchandises A¬ bearings are chiefly determined by the Torahs of supply and demand on universe oil markets. If supply exceeds demand, monetary values fall. When demand is greater than supply, monetary values rise. Offer may be affected by assorted factors – struggle and inauspicious conditions conditions – in countries of production petro A¬ nexus. Demand rises with increased activities economiq – and fall when industrial production slows. The planetary economic crisis has resulted in a lessening in demand since late 2008. It increased with the recommencement eco A¬ nomic and fiscal observed since 2010.

Furthermore, crude oil merchandises – when they are purchased by a refiner or bargainer – must be trans A¬ carried by oilers to Mauritius. They must so be unloaded, transported by grapevine to ‘storage armored combat vehicles ‘, so distributed by oiler trucks to Stationss – service as needed. All these operations cost of the Ar A¬ gent.

As they are conducted by private companies that have invested in substructure and logistics to supply these services to the full state, they must retrieve their investing and do net incomes in order to regenerate their equipment.

In add-on to this, authoritiess ments worldwide impose excise responsibilities and revenue enhancements on crude oil merchandises. This helps to raise financess to finance assorted services to the population. These excise revenue enhancements are calculated on each litre and non the value, because the sum is fixed and does non alter with alterations in monetary values of crude oil merchandises at beginning.

The whole universe pays for gasolene in U.S. dollars. So the exchange rate of each currency against the dollar does non impact the monetary value. When the dollar appreciates against the euro, Europeans are paying more for crude oil merchandises. Similarly, we pay more when our rou A¬ pie depreciates against the dollar. Oil monetary values are besides capable to VAT. The 15 % revenue enhancement on value added are based on value non volume. So when aprix addition at the beginning, the sum of VAT is besides increasing.

How are monetary values determined?

The monetary values of gasolene and Diesel are sold by STC to oil companies A¬ tie under the oil to gas Stationss and so by gas Stationss to consumers are determined A¬ ted by jurisprudence. TCC produced all the paperss of each cargo of crude oil merchandises it purchases, sums paid as revenue enhancements, excise revenue enhancements and the Petroleum Pricing Committee ( PPC ). The PPC will reexamine all information submitted by tions TCC and either O.K. or reject its proposals for monetary value repair. The PPC shall subject these recommendations to the govern A¬ ment which can so repair monetary values.

The monetary value construction of gasoline and Diesel is composed of the undermentioned constituents:

CIF ( cost, insurance and cargo )

Government revenue enhancements and responsibilities

Administrative costs of TCC

Profit Margin distributers ( Shell, Total, Chevron, Indian Oil )


Amount of Price Stabili  zation Account


Profit border of gas Stationss

TCC receives merely 37 cents per litre to run into the administrative and fiscal costs for the purchase, transit, transportation of crude oil merchandises. This sum represents about

25 % net income borders for service Stationss.


The suspension that seems to give the STC ( State Trading Corporation ) to consumers about an addition in the monetary value of fuel will last at that place? The return of a meeting of the new Petroleum Pricing Committee, whose composing remains a secret, dramas on the nervousnesss of consumers. It looks like the ‘management of public sentiment ‘ to better get down the bitter pill.

Anyhow, two places this hebdomad are deserving observing. There is first the resistance demands for a decrease in excise responsibility on crude oil merchandises, which harmonizing to the Leader of the Opposition would hold “ a positive sweet sand verbena consequence on prices. “ In add-on, the MMM calls for the abolishment of the part of Rs 3 per litre of crude oil merchandises that consumers are asked to pay in order to run into the losingss of Rs 4.7 billion on hedge.

For its portion, the Consumers ‘ Association of Mauritius ( ACIM ) is once more leapt to denote a series of actions, which it does non uncover the inside informations to convey the authorities to ground about crude oil merchandises. The Acim reiterated its petition that the contract between the STC in Mangalore Refineries is made public.


The monetary value of petroleum on the universe market dropped from 91 dollars to 89 dollars between December and January. Despite this, the monetary value at the pump rose dramatically, an addition of Rs 3.80 for gasoline and Rs 4.40 for Diesel.

This addition likely reflects fluctuations in universe monetary values which occurred between December and January. However, in the absence of inside informations on the contract signed between STC and Mangalore Refineries, it is hard to understand the monetary value mechanism applied. Furthermore, since oil is paid in dollars, we note that the currency was more or less stable so far.

The chief grounds that led to the constitution of the Petroleum Pricing Committee ( PPC ), replacing the APM ( Automatic Price Mechanism ), in force since 2004, are the deficiency of transparence and trouble of the populace to understand the mechanism or Accommodating the local monetary value fluctuations relative to the planetary market. The CPP, unlike the NPA who sat each month, will hold no agenda, but will run into at least one time every four months, depending on market developments.

TCC is understood that other factors affect the concluding monetary value, including dealing costs, cargo, set downing and domestic distribution. Note that the monetary value of gasolene and Diesel include a part, per litre, 30 in Mauritius Island Sustainable Fund, Rs 1.85 to the Road Development Authority, at Rs 3.00 and Rs 1.50 Hedging Fund the subsidies on gas, rice and flour, among others.

Taxes ( excise and VAT ) amounting to Rs 17 for gasoline ( 35 % ) and Rs 8.50 for Diesel ( 21 % ). Subsidies on rice, flour and gas family cost Rs 1.2 billion to the province or Rs 1,000 per capita. So, by paying higher gasolene monetary values, automobilists are now subsidising the gas the whole society, including the wealthy.

The new fuel monetary values will impact different sectors of the economic system.

The extra costs of distribution will be passed on to consumers through higher monetary values for merchandises and services. It is non ruled out that cab drivers are reexamining their rates. The monetary value of coach ticket holding late been increased by 20 %, it is ill-defined coach operators complain yet. The combined effects of lifting monetary values and the drouth that continues will impact negatively on rising prices. Hopefully, nevertheless, that the high monetary value of gasolene causes a lessening in traffic, therefore cut downing our roads!