Oil prices falling in international market: BPC makes profit

The government is making unusually high profit by selling fuel oil. Price of fuel oil has come down in the international market by more than 50 per cent during the last one year. But the government is selling oil in the country at the old rate. Bangladesh is now a country where oil price is third highest. Price of oil is the highest in Congo; Senegal comes next.
When the price of oil was going up in the global market, Bangladesh fixed its price January 04, 2013. This resulted in the price hike of transportation and production affecting consumers and producers.
During his post-budget press conference the finance minister indicated that there could be some reduction in prices of fuel oil. But there is yet no such initiative. India has, however, adjusted the price of oil several times.
When the multinational oil companies are worried about their declining profit, the Bangladesh Petroleum Corporation (BPC) made a profit about Tk 40 billion (4,000 crore) in one year. BPC made the maximum profit by selling octane and petrol at Tk 40 a litre. Profit was Tk 20 per litre in respect of diesel, furnace oil and kerosene.
In the first three months of the current year the average price of crude oil in the global market stood at $54 per barrel. This was followed by slight increase in the subsequent three months and the price stood at $61. The price again came down to $47.12 a barrel. International market forecast is that the price will  remain stable in the next six months. After assessing the overall situation, Goldman Sachs experts have predicted that average price of oil will remain confined to $50 per barrel up to 2020.
 According to the chairman of BPC, the price of oil will remain the same during the next six moths. This means more profit for the BPC. The finance ministry is of the view that BPC can now make up the past losses and build up a stable financial situation.
The World Bank prepared a statement of profit of the BPC in February last. At that time price of oil in the international market was $70 per barrel. The production cost of octane and petroleum was Tk 56 and paisa 85 a litre. Octane and petroleum were sold to the customers at Tk 99 (octane) and Tk 96 (petrol) a litre. After deducting the commission of the distributors, BPC's profit was Tk 35.49 per litre. In the cases of kerosene, diesel, furnace oil and jet fuel  the profit per litre was Tk 13.77, Tk 14.68, Tk 19.57 and Tk 18.75 respectively.
The government is saving money from subsidy budget. In 2014-15, there was an allocation of Tk  24 billion (2,400 crore)  as subsidy in energy sector but actual expenditure was Tk 7.0 billion (700 crore). The government is benefiting  in  different ways because of falling oil prices in the global market but there is no relief for the consumers.   
When the price of petrol and octane was last increased in January 2013, the government promised that if the price went down in the international market there will be reduction in domestic price. But it backed down from this position. Businessmen have demanded to cut down domestic oil prices. They point out that domestic production cost can not be reduced because of high prices of oil.
Experts suggest that profit earned from selling petrol, octane, diesel, etc., may be kept in a separate account. Subsidy will be provided from this account when needed. The profit earned from selling oil may not be used in other sectors. It should be spent in the same sector as and when found necessary.

The writer is an economist and columnist.
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