(MENAFN- Gulf Times) * Regulation on both grades of gasoline prices can support local economic activity as well as citizens and residents
In the past, the distribution companies were for refined petroleum derivatives (fuels) such as gasoline (regular and super), diesel, jet fuel and liquefied petroleum gas used in homes, transport and industry. And these national companies are fully-owned by the government, for example in Qatar.
We had National Petroleum Company for Distribution; NODCO was responsible for the local distribution and filling operations. When it was merged with Qatar Petroleum, it was called Qatar Petroleum Refinery.
In the past, fuel prices were subsidised by the government. These refined petroleum derivatives were distributed in the local market with the surplus exported.
Currently, Qatar Petroleum Refinery produces two grades of gasoline, namely, first-class gasoline (91 octane) and premium gasoline (95 octane), and they are produced at the Mesaieed Industrial Area. It is pumped through the pipeline to the Doha warehouses in the Abu Hamour area, where distribution is carried out.
The surplus of both grades – 91 and 95 octane gasoline – is exported to the world market.
These refined petroleum products are stored and distributed through Qatar Fuel Company (WOQOD), which is specialised in storing, distributing and marketing oil and gas products as a public shareholding company and listed on the Qatar Stock Exchange. WOQOD is considered the exclusive distributor of all fuel products within the State of Qatar.
Recently, the world has witnessed a remarkable improvement in economic activity, due to the policy of gradually opening up the economies. It comes after a long period of the "total-partial" lockdowns that have paralysed the joints of the global economy and negatively impacted the demand for oil and its derivatives as well as return to normal life.
The gradual recovery is reflected in the prices of oil and its derivatives due to the increase in demand, as a barrel of Brent crude reached nearly $76, an increase of nearly 200% since mid-April.
This rise was reflected in the prices of fuels such as both types of gasoline and diesel, a high rise due to their correlation with the price of crude oil, as oil derivatives are priced on the basis of the international price of the same derivative directly related to the price of a barrel of crude oil (Brent).
The State of Qatar is an exporter of normal and super gasoline and low-sulphur diesel from sulphur-free refineries and from gas-to-liquids (GTL) plants.
In countries that import these petroleum derivatives on a regular basis, the reduction or increase is carried out according to a law called the automatic adjustment of fuel prices, and this adjustment is made upon delivery and not upon purchase. Assuming a state bought oil or gasoline at today’s price, the adjustment is reversed after three months and not when signing the purchase contract. In the oil market, for example, the contract is first concluded today, then delivery takes place three months later, according to the price of oil, if crude oil or gasoline is imported.
Often the global price of oil is the main factor controlling the price of fuels, as the prices of gasoline, diesel and jet fuel are driven by the prices of crude oil. If the price of crude oil rises, fuel prices rise too.
It is preferable that the prices of fuels, especially gasoline, are regulated so that the maximum prices announced on a monthly basis come under a ceiling. It will be reflected on the price of both types of gasoline, and therefore, these prices may not exceed a fixed ceiling in order to reduce the vulnerability to fluctuations in prices of oil and its derivatives. As economic activity returns, this will support economic growth and reduce the burden on both citizens and residents.
* Saad Abdulla al-Kuwari is an expert in oil and gas and is exploring the future of energy
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