Protesting shareholders wrote a letter to Raisi/ Is the oil company’s formula for the feed rate wrong?

According to Tejarat News, the government has recently increased the feed and gas rates of petrochemical companies to seven thousand tomans (without ceiling). Last year, this rate was in the range of five thousand tomans. At the same time, this increase has taken place, and with the rate of five thousand tomans, the life of some companies in this industry was at risk.

The letter of 7 thousand shareholders in protest to the president

The 40% increase in the gas feed rate is not the end of the story. The feed rate is seven thousand tomans without a ceiling and may increase even more in the future. Rumors of an increase in the feed rate of petrochemicals started in the fall of last year at the same time as the Budha bill, which at the same time drew protests and criticism from the companies.

It was further said that this rate will not be taken into account and is only the initial proposal of the government. After holding many meetings between the parties, the talks indicated to continue with the same prices as before. What happened surprised both the oil refining companies and their shareholders.

The increase in the feed rate of petrochemicals is at a time when one of the president’s important promises, on which a lot of maneuvering was done, was not to reach into the shareholders’ pockets in order to cover the budget deficit. Now, experts and market analysts believe that the increase in the rate of petroleum refining even though a quarter of a year has passed, exactly means that the government is reaching into the shareholders’ pockets!

Historical mistake in the formula for calculating the feed rate?

The feed rate formula for petrochemicals was determined in January 1994 by the authority given to the Ministry of Petroleum. The current formula is a function of North American and European hub rates. With the recent global developments, including the war between Russia and Ukraine, global gas prices have increased, and this has made the country’s petroleum refining companies more competitive.

This means that companies have a higher marginal cost of production than their foreign competitors. This issue either reduces the company’s profit margin from product sales, or shows itself in the form of a significant decrease in sales volume and loss of customers. As a result of both, the profitability of petroleum refining companies decreases.

This issue made Mohsen Alizadeh, a supervisory member of the Supreme Council of the Stock Exchange, to state: Considering that the only advantage of petrochemical companies for production is the cheap feed rate, with the current formula that is a function of the hub rate of North America and Europe, this advantage is Everything is taken from them.

Alizadeh also pointed to the similar situation in the UAE and stated: In countries like the United States and the UAE, they supply gas to their petrochemical companies at a much lower price than the price set in our country.

It should be seen whether there will be a reaction to the criticisms that have been made to the formula for calculating the feed rate of petroleum refineries. Also, more importantly, will the letter of 7,000 shareholders protest against the government’s breach of promise, lead to a practical action by the government to correct this rate or not?

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