Fall in oil prices to hurt refiner
Written by Writer on Sunday, October 19th, 2008
Fall in oil prices to hurt refiner
Monday, October 20, 2008
The Manila Times
PETRON Corp. claims the volatility in global crude prices is hurting its profits.
Eric Recto, president of the country’s largest oil refiner, said the sudden drop in world oil prices resulted in a “margin squeeze” because of its larger inventory.
He said that pump prices are going down “faster than the ability of refineries to adjust crude that was bought when prices [we]re high.”
For the first half of the year, Petron recorded P2.3 billion in profits, down by 14 percent year-on-year despite a 33-percent jump in revenues to P131 billion.
In light of the lower profitability, Recto said his first order of the day as Petron’s new chief is to address this issue, adding the oil refiner is already “evaluating some options.”
Nicasio Alcantaro, Petron chairman, said the company would zero in on projects that will bring it “higher yields” such as increasing its petrochemical production.
Smaller oil firms that entered the market following the deregulation of the downstream petroleum industry have been faring well thanks mainly to their smaller inventories, which make it easier for them to reflect fluctuations in oil prices.
“We are surviving and doing fine, but nothing fantastic,” Fernando Martinez, Eastern Petroleum Corp. chairman, said in an industry meeting at the Department of Energy early this month.
The executive, however, said that under a deregulated regime, there is no prescribed formula in determining prices. “We are selling diesel P45.50 for wholesale and we are left with P1.50 in terms of margin—where we will source money to finance our overhead, loans and personnel,” he said.
The industry meeting, which was held on October 6, has since been followed by a number of pump price reductions.
It would be recalled that oil prices skyrocketed to record highs in July to over $130 a barrel amid supply and demand concerns as well as speculation. Prices, however, have since gone down to less than $90 a barrel.
Analysts blame the drop in oil prices on the global financial crisis that is seen to cut demand for the commodity, especially among heavy users such as the US. — Euan Paulo C. Añonuevo
