chiaroscuro wrote:VituVingiSana wrote:@chiarascuro - ERC pricing does not take into account the full effect of financing. That has been remarked upon by both Total & KK. I spoke to a smaller importer who said when interest rates jumped from 14% to 28%, the ERC stayed 'blind' to the jump. Since most of the product is financed since even firms like KK have to borrow since it is billions per shipment.
ERC does NOT control import prices.
Ther financing of imports is therefore absorbed during the monthly central tender system. Who ever wins the tender must have quoted a price that caters for his financing cost. If not, then he should be in that [or any other] business!
The ERC formula starts with the prices after import - ex-KPRL (for imported crude) and ex-KOSF (for imported refined).
The financing costs I was referring to were AFTER the payment to the importer has been made, the stocks released and time to market. Despite what KPC says, there are (often) constraints which means product is shipped by road. Furthermore, not all stocks can be sold immediately.
Assume it takes 15 days between arrival (payment) of fuel/crude at the port to the retail selling point. At 24% interest rates = 1% for the 15 days = 1/- per litre.
The importer has to be paid within a set timeframe after the product is available. It is not expected to 'store' product for other OMCs without being paid for the fuel.
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett