Capital Ethiopia Newspaper

Petroleum companies request profit margin review, again

Ethiopia’s four major petroleum supplying companies requested a revision of the profit margin on petroleum and petroleum products they distribute. National Oil Company Plc (NOC), Libya Oil Ethiopia, Total Ethiopia SC and YBP Petroleum, requested a fuel price margin increase along with lubricant prices to the Minister of Trade, attaching a study document describing existing profit margins in other African countries.

Their letter argued that fuel margins in Ethiopia are presently the lowest in Africa. “Other African countries usually have regular margin reviews, therefore enabling oil marketing companies to keep a sustainable position compared to increasing costs,” reads the letter.

In January 2015, for the first time in over 25 years, the government has increased the profit margin for oil companies and retailers.

“The current fuel margin level in Ethiopia will inevitably deeply affect the profitability of oil marketing companies, which may have consequences on operations. Continued demand for investment in all the sectors of the Ethiopian economy in support of its growth, justifies a margin revision to improve the situation of oil marketing companies,” the letter further reads.

According to the study the second lowest profit margin in Africa is six times more than Ethiopia’s profit margin.

In related news, adulteration, the illegal mixing of diesel with kerosene is becoming more and more serious, according to a new study conducted throughout Ethiopia.

Adulterated diesel oil has been causing many problems for motorists and machine operators over the last several years, including disabling their vehicles. According to the document Capital obtained, even registered oil retail companies operating throughout the country are allegedly practicing this illegal act.

“The document reveals that some stations sell a much higher percentage of kerosene than other products sold at their stations, this implies that it is highly probable that the oil is adulterated, and the government needs to take action,” an expert asking for anonymity told Capital.

The situation has become especially serious in Mojo and Welenchiti towns located in the Oromia Regional state, which have taken center stage for such illegal activities. A couple of years ago, the government identified a network of illegal businesses run by people in these towns and prosecuted them, but the situation appears to be persisting.

Ethiopia spends over 50 percent of its total export earnings to meet the Nation’s fuel demand.