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Kathmandu Tuesday July 11, 2000 Ahsad 27, 2057.
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Surging int’l petroleum prices put
pressure on NOC
By Bhaskar Sharma
KATHMANDU, July 10 - Nepal Oil Corporation (NOC) has
indicated that it would not be able to supply petroleum products for more than four months
at the current prices unless the international petroleum prices show downturn.
"NOC cannot sustain for more than four months at the
present state," said Acting Managing Director of NOC Madan Raj Sharma.
It cannot survive with the present domestic prices if prices
of petroleum in international market do not recede, added he.
NOC, which earned over Rs 500 million profits last year, is
likely to witness erosion in its profit margin considerably if prices in the international
arena do move down. Presently, NOC is facing losses not only in subsidized kerosene but
also in diesel and cooking gas.
NOC, the fully state-owned monopolist in the import of
petroleum, is currently losing Rs 7 per liter in kerosene, Rs 112 per cylinder in cooking
gas and Rs 2.17 per liter in diesel. On the other hand, it continues to enjoy a profit of
Rs 4 per liter in kerosene.The annual demand of kerosene and diesel stands at around three
hundred fifty thousand kiloliters each while that of petrol is only about sixty thousand
kiloliters. Similarly, the annual domestic demand for cooking gas is about thirty six
thousand tons (1 ton = 70.42 cylinders).
"High sales of kerosene and diesel has made it
impossible to recover the losses through the profit margin accrued from the sales of
petrol," said Sharma.
The price of petroleum products soared up by almost 50
percent in the international market last September. NOC consequently raised the prices of
diesel by 48 percent and kerosene by 23 percent in the domestic market last September.
The price of diesel and kerosene at the time of price hike
stood at US $ 195 and US $ 225 per ton respectively. Presently, the price of diesel stands
at US $ 265 per ton, while the price of kerosene is about US $ 275 per ton.
However, it is expected that the bloating international
petroleum prices will decline as the international pressure, especially from United
States, is mounting on Organization of Petroleum Exporting Countries (OPEC), the
international cartel in the production of petroleum, to increase production quota.
The ongoing OPEC meeting in Algiers, the capital city of
Algeria, is likely to increase the production of petroleum to release the pressure on
price.
Although the OPEC meeting in Vienna, Austria, last March had
increased the production of petroleum by five hundred thousand barrels per day.
When price stubbornly refused to go down, OPEC raised
production quotas again in June - but to little effect, as it turned out. After coming
down breifly, the per barrel price of crude oil again shot past the $ 30 per barrel level.
Besides the swelling oil prices, recent depreciation, albeit minor, of Nepali currency
vis-a-vis US dollar has also fueled pressure on the domestic prices of petroleum.
Indian government’s decision to deregulate the import
and supply of petroleum products from April, 2002, is also likely to feed the instability
in the prices of petroleum products.
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