Oil product margins reduced

By CLARISSA MOI
The Independent Consumer and Competition Commission (ICCC) has reduced wholesale and retail margins for petroleum products due to the increased economic efficiency of the industry since the last pricing review in 2015.
Commissioner and chief executive officer Paulus Ain said this when asked about service station dealers being affected due to the change in the retail and wholesale pricing regulatory structure for petroleum products this year.
He said the ICCC had set the wholesale margin for 2020 at 25.16 toea per litre which was less than last year when it was 31.2t per litre, as well as in 2015, when it was 26.05t per litre.
“This reduction has occurred due to the increased economic efficiency of the industry since the last petroleum industry pricing review in 2015,” he said.
Ain explained that the ICCC had broken the margin calculation down to three major components: retail operating; retail asset; and retail landowners, in order to be more explicit about what was included in the margin.
“The actual amount paid by a retailer to a wholesaler for use of retail assets will vary from site to site depending on the level of investment by each party.
“For instance, a retailer who owns the land and assets at a service station would be entitled to the full retail margin.
“Because the circumstances at every retail site will be slightly different, the ICCC did not specify how the retail margin should be split between a retailer, a wholesaler and landowner.
“That would have to be a matter for the wholesaler and retailer to negotiate, depending on their level of investment at a particular retail site.
“The retail margins were estimated using a bottom up model based on the costs of building a new retail site.”
Ain said the ICCC had followed a prudent, extensive and transparent process in conducting the petroleum pricing review last year which included: releasing a public notice in the print media and inviting stakeholders to make submissions; requesting a specified list of information from all the wholesalers and retailers in the country; conducting surveys of retail sites; meeting with retailers and wholesalers among others before releasing a final report.
He said average sales volumes for each of the 29 centres were estimated from the data provided by wholesalers.