With the news of expecting decrease in petrol price swirling around, the oil marketing company dubbed ‘Attock Petroleum’ is embarked on exclusive campaign, ‘petrol offer’, to offload as much petrol and diesel as they can before the bi-weekly price adjustment due on Oct, 15 2023.
The strategy aims to prevent potential inventory losses in case the speculated reduction in petroleum product prices by the Government of Pakistan actually occurs.
The Petrol Offer
The oil marketing company (OMC) is offering a substantial Rs 5 discount per litre to customers surpassing specific fuel thresholds. For four-wheeler vehicles, the threshold is established at 20 litres, while for two and three-wheeler vehicles, it is set at 5 litres.
As per the industry analyst, “The inventory losses could be substantial if the price reduction in the upcoming Oil & Gas Regulator Authority (OGRA) announcement is significant. This may justify offering discounts to roll out larger volumes before inventory valuations require adjustment.”
Another analyst informed, “OMC losses are a common practice because OMCs are obliged to maintain a specific minimum stock level, per OGRA regulations. This stock helps OMCs reap profits when fuel prices soar and cushion losses when prices plummet.”
How It Works?
Let’s consider a scenario where an Oil Marketing Company (OMC) imports a fuel product (petrol or diesel) for Rs 100. The company can only sell it at the price determined by the Government. If the Government sets the price at Rs 105, the OMC makes a Rs 5 profit. Conversely, if the Government sets the price at Rs 95, the OMC incurs a loss of Rs 5.
While the Government aims to avoid bankrupting OMCs, it also wants to retain control over pricing. Consequently, it compels OMCs to carefully time their actions. The current strengthening of the Pakistani Rupee and the global decline in petroleum product prices have led to speculation that prices might decrease.
What do you think about the petrol offer introduced by Attock Petroleum