Oil marketing companies: Profit margins up 10%

Increase in petrol and diesel prices comes as a blessing.

KARACHI: Oil marketing companies are one of the few who made gains from the recent increase in petroleum product prices.

The government has taken oil marketing companies’ (OMCs) margins up by another 9% to 10% in October with the hike in petroleum product prices, according to a Topline Securities research note.

Profit margins on diesel have risen by Rs0.14 per litre while on petrol they have gone up by Rs0.16 per litre, adds the note. This is the second consecutive increase in margins on a monthly basis.

The increase in margins will benefit the largest OMC – Pakistan State Oil – the most followed by Attock Petroleum, according to Topline estimates. It will improve annual earnings of Pakistan State Oil and Attock Petroleum by Rs3 to Rs3.15 per share and Rs1.5 per share, respectively.

The government after discussions with OMCs had agreed to raise margins by Rs0.5 per litre in a phased manner. So far in the last two months, margins on diesel and petrol have been increased by Rs0.27 and Rs0.32 per litre while another rise of Rs0.18 to Rs0.23 per litre is expected in the next price revision.

Petroleum product prices are revised monthly on the basis of international oil prices. Oil refineries and marketing companies change prices of all petroleum products, except kerosene oil, under controlled deregulation. The Oil and Gas Regulatory Authority works as a facilitator under the deregulated oil pricing mechanism and notifies new prices.

The government increased prices of major petroleum products by up to five per cent on Saturday in the wake of a rise in global crude prices and depreciation of rupee.

Published in The Express Tribune, October 4^th, 2011.