Three months into the Corona Virus Disease 2019 pandemic the cost of fuel per liter has increased about four times already.
With the continued upward adjusts of fuel prices mostly over the one peso mark in all of the increases effected, we could sense that the oil industry appears to have no mercy to the users of its merchandise and the world economy in general.
This week another round of price increase will have already been in effect. The upward adjustment was announced during the week-end. Though not as big as the prior weeks’ price hikes still the new round is another crucifixion the people and the economy of the Philippines have to suffer.
This apparently unbridled caprice of the cartelized industry to up its prices even with just a slight movement in the global market has led us to think deep of how much profit the fuel firms could be amassing.
Our thoughts went back to a non-expected discovery of information about the way importation of raw crude and finished fuel products is done. Yes, it was not until we got this very reliable information some months back that we finally believe how huge the profit companies in the oil industry are raking in. This despite claims by the Department of Energy that it is closely monitoring the conduct of the business operation of the country’s leading oil firms.
By reliable information we mean we heard it from one guy who is a ranking executive of this huge Western-based shipping company operating its own fleet of oil tankers and bulk carriers. He was with a sub-agent of a broker facilitating the delivery of oil products imported from China by one of the country’s oil players. The latter chartered some of the largest vessels of the European-headquartered shipping firm. The shipping company executive came down south and then flew back north to Batangas to check on the progress of discharging the oil cargo from the huge oil tankers. The oil firm has a huge depot in the south, in the Visayas, and in Batangas as well.
From what we were told we learned that each of the huge ships was loaded with as much as 75 thousand tons of diesel and gasoline. The tankers reportedly arrived in the Philippines sometime during the third week of January and by the time the information was relayed to us it was already the second week of February. And according to our informant the discharging of the fuel cargo was still on-going. During that particular period the price of oil in the world market was relatively low; more so the oil products sourced from China.
We were also informed that for the days that the ocean-going oil tankers are in port whether they are unloading their precious cargo or not for one reason or another, the importing oil company will be paying 15,000 US dollars per ship per day.
But when we were told by our informant how many tons of crude oil or gasoline each boat carries, we easily imagine that the $15 thousand per day per vessel expenses could only be peanuts for the oil company concerned.
To back our assumption, before we came out with this column we took much time to do some research on the shipping company as to the average capacity of its oil tankers and we also did a crude process of converting the shipping tons of oil products to barrels each ton then to cubic foot up to cubic inches and finally to number of liters per ton.
Based on the average capacity of each oil tanker we got from the company bulletin, each carries 75 thousand tons. This volume, according to the newsletter, would be enough for a car to circle the globe 36,000 times if it were all land mass.
Our conversion is anchored on a shipping capacity measurement which says that one (1) shipping ton is equivalent to 8 barrels of oil products. Converted further into cubic foot, the 8 barrels would amount to 40 cubic feet. With each cubic foot totaling 1,728 cubic inches the 40 cubic feet per 8 barrels of oil products would amount to 69,120 cubic inches per ton. Converting further down, to get the number of liters per ton of oil products we divided 69,120 cubic inches by 61.025 which is the equivalent cubic inches per liter of crude or gasoline. This therefore, gives us an average of roughly 1,134 liters per ton.
So, if the average capacity of each tanker of the Europe-based shipping conglomerate is 75,000 tons multiplying it with the 1,134 average liters per ton that would be a whopping 85,050,000 liters per boat. And mind you, the delivery of the China diesel and gasoline came in several giant oil tankers; not one!
Given the number of clients this oil company has accumulated over the years of its existence it is easy to assume that each delivery could probably last only for a month, or it could even be less. And assuming that the oil company would just net an average of P1 per liter profit after tax and other operating expenses how much would that be per shipment?
But then, again, an oil product importation of that magnitude may have substantial provisions for stocks to be hidden in the recesses of some secretly buried giant steel tanks and retrieved and disposed only when prices go high based on world oil market movement. Therefore, the average net profit a particular importation like the one unloaded for about three weeks some months back could go even bigger — perhaps even double or triple.
Really, we now believe that going into the oil industry is indeed reserved for the big boys. It requires huge financial investments and an adept mind that can compete with the best, the brightest, and perhaps the shrewdest among the very few overly endowed businessmen.
Hence, as these captains of the industry are set to continue amassing wealth, power and political influence, we can only hope that they will not forget the people in the community where their business operates.
They have to give up part of their huge profit to help others especially those whose livelihood largely depends on the movement of the prices of their products and services.
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