Fuel oil prices may fall by this month

The government is most likely to decrease fuel oil prices by this month if the prices in international market remain at the current level or dip further, chief adviser’s special assistant for power and energy ministry M Tamim told New Age on Tuesday.
Tamim along with senior officials of the energy division are expected to hold a meeting with finance adviser Mirza Azizul Islam today to discuss the issue.
‘The government is actively considering decreasing prices of fuel oils like diesel and kerosene as the oil price in international market has come down sharply over the last month. Most likely, we will decrease oil price in local market within this month,’ Tamim said.
He said after discussing the issue with the Finance Division and the communications ministry, they would fix how much prices should be decreased. ‘Apart from the Finance Division, we will discuss the issue with the communications ministry as transport fare is related with fuel prices.’
The price of crude oil dipped to around $87 in international market on Monday following the worldwide economic turmoil, especially the recession in USA.
According to a report of the New York Times posted on Monday, the oil price in international market might continue to slide to $70 per barrel or even lower.
The price of crude oil was around $141 when the government increased the price of diesel and kerosene to Tk 55 per litre from Tk 40 and octane to Tk 90 from Tk 67 and petrol to Tk 87 from Tk 65 on July 1.
Bangladesh imports around 22-23 lakh tonnes of refined oils like diesel, kerosene and octane and around 13-14 lakh tonnes of crude oil from which Bangladesh Petroleum Corporation produces diesel, kerosene and petrol. There is a gap of around $10-$20 in refined and crude oil prices.
Officials of BPC claimed that despite oil price fall in international market, the BPC incurred a loss of around Tk 10 per litre in selling diesel and kerosene in September and made ‘some’ profit in selling octane and petrol.
The BPC imported diesel, kerosene and octane at a rate of around $114-$120 per barrel in late September when the crude oil price came down to around $100. According to this estimate, the total import cost stands between Tk 49 and Tk 52 per litre.
In addition to the import cost, the BPC pays Tk 11.50 as duty to the government for per litre of octane and Tk 6.93 for per litre of kerosene and diesel. Besides, there are costs related to evaporation loss, transportation cost within the country and margin for the oil marketing companies.
In total, BPC’s expenditure as duty, evaporation loss and other costs stands around Tk 10 per litre for diesel and kerosene and around Tk 18 for octane.
With these, BPC’s total cost in selling each litre of diesel stands between Tk 59 and Tk 62. BPC, however, sells diesel to the oil marketing company at Tk 52.01, kerosene at Tk 52.54 and octane at Tk 85.34 per litre.
With the fall of oil prices, BPC’s actual loss in selling diesel and kerosene came down to around Tk 7 per litre in late September while it made a profit of over Tk 20 for each litre of octane and petrol. ‘As BPC sells around 1-2 lakh tonnes of octane and petrol against over 24 lakh tonnes of diesel and kerosene, the profit from octane and petrol is not significant,’ said an energy division official.
Officials of the energy division believe that as the fuel oil price had come down to $87 per barrel in October, the BPC’s loss in selling diesel and kerosene would be diminished while its profit from octane and petrol sales would increase further.