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Composite Barrel Analysis in Oil IndustryBy Puguh Bodro Irawan E-mail: [email protected] Vienna, 17 February 2012What is Composite Barrel Analysis (CBA) in oil industry? The analysis can be used as a tool for promoting public educationor image, as a part of public relation campaigns: * impacts of higher oil prices on the world economy * negatively affecting GDP growth and global inflation * prices of other commodities soaring up * WHO benefits the most from the increased oil prices (oil
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Composite Barrel Analysis in
Oil Industry
By Puguh Bodro Irawan
E-mail: [email protected]
Vienna, 17 February 2012
What is Composite Barrel Analysis
(CBA) in oil industry?
The analysis can be used as a tool for promoting public education
or image, as a part of public relation campaigns:
* impacts of higher oil prices on the world economy
* negatively affecting GDP growth and global inflation
* prices of other commodities soaring up
* WHO benefits the most from the increased oil prices (oil windfall)
Prime beneficiaries:
* Oil producing countries?
* International Oil Companies?
* or Treasuries of the major oil consuming countries (G-7)?
How to quantify these benefits in one particular unit
value of oil product?
Composite Barrel Analysis in Oil Industry-PuguhBIrawan
(Feb, 2012) 2
CBA: aim and its components
To estimate components in the costs to produce and sell a barrel of gasoline and other oil products to final users.
Cost components:
* cost of crude oil to refiners
* costs of refinery processing, marketing, distribution, retail station
* profits/losses of refiners, marketers, distributors, retail station owners
* taxes
Composite barrel analysis is an attempt to construct a per barrel aggregate retail product price and to disaggregate this value into its components, representing an average price per barrel of refined oil products
who gets what from the imported oil? (retail price of a litre of gasoline)
Composite Barrel Analysis in Oil Industry-PuguhBIrawan
(Feb, 2012) 3
Composite Barrel Analysis:
its major components
* There are 3 main components used in measuring
Composite Barrel Analysis (CBA):
1) Average price of imported crude oil
2) Taxes charged on different oil products in
consuming countries
3) Industry margin, i.e. refining costs,
transportation, distribution costs, IOC profits,
exchange rates fluctuations, etc.
* CBA in oil market analysis is commonly used in
major oil consuming countries of OECD, given the
fact that the component of oil products taxes is very
important in CBA within the context of its
comparison with oil prices subsidy issues in most
non-OECD countries
Crude price
Taxes
Industry margin
Composite Barrel Analysis in Oil Industry-PuguhBIrawan
(Feb, 2012) 4
CB: meanings of its components
Oil crude price: representing crude imports
costs, as an indicator of revenues earned by oil
exporting countries
Taxes: revenues earned by treasuries of
importing countries from imposing taxes on
products sold to final users
Industry margin: including profits of IOC plus
various costs
Composite Barrel Analysis in Oil Industry-PuguhBIrawan
(Feb, 2012) 5
CB: calculation
CB as average price of a consumption weighted barrel of 5 main refined oil products:
Let c and p be the consumption and retail price (including taxes) of the product groups, then
CB = (p1 c1 + p2 c2 + … + p5 c5) / (c1 + c2 … + c5)
Average taxes calculated according to above formula
Industry margin = CB – average taxes – crude price
Gasoline Kerosene Diesel Gasoil Fuel Oil
Composite Barrel Analysis in Oil Industry-PuguhBIrawan
(Feb, 2012) 6
CB in G-7 countries
Source: OPEC, Who gets what from imported oil, November 2011
In UK, the government charged taxes
$1.15 in every litre of fuel purchased in
the pump station with the averaged retail
price $1.77 in 2010, thus making taxes
accounting for two-thirds of total retail
fuel price.
Components of taxes in retail fuel prices
were also significant in Germany, Italy
and France, accounting for above 60%.
Of G-7 countries, USA had the lowest tax
component (16%) in retail fuel price.
In conclusion, the burden of high retail fuel prices are
on the final consumers, while most benefits from taxes
earning go to the Governments of consuming
countries, and of course to producing countries as
well.
Composite Barrel Analysis in Oil Industry-PuguhBIrawan
(Feb, 2012) 7
OECD Taxes versus OPEC Oil Export Revenues
G7 of
OECD 600
other OECD
278
734
0
100
200
300
400
500
600
700
800
900
1000
Billion USD
G7 OECD OPEC
878
Source: OPEC, Who gets what from imported oil, November 2011
During the last 5 years (2006-2010), the
averaged revenue earned by the
governments of OECD countries from oil
taxes reached US$878 billion per year, with
G-7 countries receiving $600 billion.
In the same period, 12 OPEC member
countries earned US$734 billion annually
from the exports of their oil.
Summary: CB and its usefulness
CB is a valuable tool to break down the costs of petroleum product paid by the final consumers into various components, including crude oil price, taxes, residual industry margin
An instrument to clarify public misconception about oil prices, especially in major oil consuming countries, about WHO benefits the most from the profits over higher oil prices
Composite Barrel Analysis in Oil Industry-PuguhBIrawan
(Feb, 2012) 9