Assessing Factors Influencing Petroleum Prices Economics Essay

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Saturday, January 22, 2011. Met for the first time yesterday, the Petroleum Pricing Committee, which replaces the Automatic Pricing Mechanism (APM), has revised upward the prices of petroleum products. The price of petrol increased from Rs 44, Rs 70 to 48, 50 liter. Giving an increase of Rs 3, 80. The price of diesel goes, he, of Rs 35, Rs 50 to 39, 90 liter. An increase of Rs 4.40.

The price of gasoline import costs only Rs 21, 33 liter. However, several loads add to the price, including excise duty (Rs 10.80), the hedging (Rs 3), the contribution of the Road Development Authority (Re 1.85), the contribution to the subsidies on rice, flour and Gas Appliances (Re 1.50). As for diesel, its import price is Rs 21, 48. Excise duties are imposed Rs 3.30, the hedging (Rs 3), the contribution to the Road Development Authority (Re 1.75), the contribution to the subsidies on rice, flour and Gas Appliances (Re 1.50).

The government proposes to set up a Price Stabilization Account to ensure greater stability in prices of petroleum products. This Will Be The Key Elements In The Start Of The New Petroleum Pricing Committee to replace The Automatic Pricing Mechanism. This will be the key element in the start of the new Petroleum Pricing Committee to replace the Automatic Pricing Mechanism.

This fund will provide for floors and ceilings higher or lower prices. According To The overlap of information available, The Price of petroleum products Would Remain Unchanged "during the periodical, The decline in world Price Is Less than 7%. According to the overlap of information available, the prices of petroleum products would remain unchanged during the period, the decline in world prices is less than 7%. The Mechanism Provides aussi thats the maximum Should Be drop around 10%. The mechanism also provides that the maximum drop should be around 10%.

Prices of petroleum products could be increased to a maxi ¬ mum of 15%. Any increase below 5% would not be passed on to customers with funds available in the Price Stabilization Account. In the absence of liquidity in the Stabilization Fund, the increase in retail prices will be a maximum of 15% regardless of whether the world price has exceeded 15%.

The first meeting of the Petroleum Pricing Committee, which meets a maximum of four times per year, except in cases of force majeure, scheduled for this month.


Megh Pillay, le CEO de la State Trading

Corporation (STC), promotes transparency in the pricing of petrol and diesel. The mechanism is explained to the public in a booklet trilingual - French, English and Creole - free.

To defi quotidien, Megh Pillay said he had to replace the Automatic Pricing Mechanism (APM) by a more transparent and stable for three main reasons. First, several weaknesses were identified in the NPA. Second, the components of the price structure were not well understood. Third, the public could not reconcile the movement of prices on the world market with changes made by the NPA.

Price declines followed gains month after month. Higher prices were still perceived ¬ me being exaggerated and unnecessary, especially when they were announced, while world prices were declining. Lower prices, meanwhile, were always per ¬ ceived as inadequate and slow in coming.

With the Petroleum Pricing Committee (PPC), prices will not change each month, but only when it becomes absolutely necessary ¬ sary as a result of substantial changes in the movement ¬ ment of prices on the world market. A major objective of the new mecha ¬ me is to mitigate, if not nullify, the effects of fluctuations in world prices to retail prices in gas stations. The selling price will be fixed for a given period, based on an average price of Platts over a year. Platts is the global standard in the field of oil.

The CIF (Cost Insurance Freight) is the price of petrol and diesel costs the lands ¬ ment in Port Louis. It includes the Platts price and the premium paid to the refiner (FOB), the price paid to get the product in Mauritius (Freight) and the price paid for petroleum products (Insurance). The estimated retail price for the year will be based on information on the price paid for the past six months and on projections of Platts ¬ tions for the next six months.

The State Trading Corpora ¬ tion (STC) imports all of our needs in petroleum products ¬ Liers and give them to com ¬ oil companies including Shell, Total, Chevron and Indian Oil storage and distribution. It pays for imports and is paid when it sells the products to oil companies. A Price Stabilization Account will be created for each product to protect the market fluctuations and price fluctuations ¬. Even ensure price stability.

Stabiliza ¬ tion of prices of petroleum products intended to prevent shocks monthly commodity prices crucial ¬, which hampers planning ¬ tion in the long term all economic activities and the family budget and directly affects the country and its citizens. If the percentage decline between the calculated price and the retail price is below 7%, there will be no change. ¬ If the percentage increase between the Tagus calculated price and the current price at retail is below 5%, there will be no change in retail prices.

Factors influencing prices

The prices of petro products ¬ bearings are primarily determined by the laws of supply and demand on world oil markets. If supply exceeds demand, prices fall. When demand is greater than supply, prices rise. Offer may be affected by various factors - conflict and adverse weather conditions - in areas of production petro ¬ link. Demand rises with increased activities économiq - and fall when industrial production slows. The global economic crisis has resulted in a decrease in demand since late 2008. It increased with the resumption eco ¬ nomic and financial observed since 2010.

Furthermore, petroleum products - when they are purchased by a refiner or trader - must be trans ¬ carried by tankers to Mauritius. They must then be unloaded, transported by pipeline to 'storage tanks', then distributed by tanker trucks to stations - serve as needed. All these operations cost of the ar ¬ gent.

As they are conducted by private companies that have invested in infrastructure and logistics to provide these services to the entire country, they must recover their investment and make profits in order to renew their equipment.

In addition to this, governments ¬ ments worldwide impose excise duties and taxes on petroleum products. This helps to raise funds to finance various services to the population. These excise taxes are calculated on each liter and not the value, because the amount is fixed and does not change with changes in prices of petroleum products at source.

The whole world pays for gasoline in U.S. dollars. So the exchange rate of each currency against the dollar does not affect the price. When the dollar appreciates against the euro, Europeans are paying more for petroleum products. Similarly, we pay more when our rou ¬ pie depreciates against the dollar. Oil prices are also subject to VAT. The 15% tax on value added are based on value not volume. So when aprix increase at the source, the amount of VAT is also increasing.

How are prices determined?

The prices of gasoline and diesel are sold by STC to oil companies ¬ tie under the oil to gas stations and then by gas stations to consumers are determined ¬ ted by law. TCC produced all the documents of each shipment of petroleum products it purchases, amounts paid as taxes, excise taxes and the Petroleum Pricing Committee (PPC). The PPC will review all information submitted by ¬ tions TCC and either approve or reject its proposals for price fixing. The PPC shall submit these recommendations to the govern ¬ ment which can then fix prices.

The price structure of petrol and diesel is composed of the following components:

• CIF (cost, insurance and freight)

• Government taxes and duties

• Administrative costs of TCC

• Profit Margin distributors (Shell, Total, Chevron, Indian Oil)

• Adjustment

• Amount of Price Stabili ¬ zation Account


• Profit margin of gas stations

TCC receives only 37 cents per liter to meet the administrative and financial costs for the purchase, transportation, transfer of petroleum products. This amount represents approximately

25% profit margins for service stations.


The suspension that seems to give the STC (State Trading Corporation) to consumers about an increase in the price of fuel will last there? The return of a meeting of the new Petroleum Pricing Committee, whose composition remains a secret, plays on the nerves of consumers. It looks like the 'management of public opinion' to better swallow the bitter pill.

Anyway, two positions this week are worth noting. There is first the opposition demands for a reduction in excise duty on petroleum products, which according to the Leader of the Opposition would have "a positive snowball effect on prices. " In addition, the MMM calls for the abolition of the contribution of Rs 3 per liter of petroleum products that consumers are asked to pay in order to meet the losses of Rs 4.7 billion on hedging.

For its part, the Consumers' Association of Mauritius (ACIM) is again leapt to announce a series of actions, which it does not reveal the details to bring the government to reason about petroleum products. The Acim reiterated its request that the contract between the STC in Mangalore Refineries is made public.


The price of crude on the world market dropped from 91 dollars to 89 dollars between December and January. Despite this, the price at the pump rose dramatically, an increase of Rs 3.80 for petrol and Rs 4.40 for diesel.

This increase probably reflects fluctuations in world prices which occurred between December and January. However, in the absence of details on the contract signed between STC and Mangalore Refineries, it is difficult to understand the price mechanism applied. Moreover, since oil is paid in dollars, we note that the currency was more or less stable so far.

The main reasons that led to the establishment of the Petroleum Pricing Committee (PPC), replacing the APM (Automatic Price Mechanism), in force since 2004, are the lack of transparency and difficulty of the public to understand the mechanism or Reconciling the local price fluctuations relative to the global market. The CPP, unlike the NPA who sat each month, will have no schedule, but will meet at least once every four months, depending on market developments.

TCC is understood that other factors affect the final price, including transaction costs, freight, landing and domestic distribution. Note that the price of gasoline and diesel include a contribution, per liter, 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 petrol (35%) and Rs 8.50 for diesel (21%). Subsidies on rice, flour and gas household cost Rs 1.2 billion to the state or Rs 1,000 per capita. So, by paying higher gasoline prices, motorists are now subsidizing the gas the whole society, including the wealthy.

The new fuel prices will affect different sectors of the economy.

The additional costs of distribution will be passed on to consumers through higher prices for products and services. It is not ruled out that taxi drivers are reviewing their rates. The price of bus ticket having recently been increased by 20%, it is unclear bus operators complain yet. The combined effects of rising prices and the drought that continues will impact negatively on inflation. Hopefully, however, that the high price of gasoline causes a decrease in traffic, thus reducing our roads!