Enemalta Corporation's oil purchases

It is incredible that notwithstanding how many times you repeat simple facts, journalists keep on getting them wrong.

Fact 1. In Wednesday's article on the price of oil, the writer bases his calculation on the spot price of oil for January 21, 2009, cavalierly ignoring the oft repeated declaration that Enemalta has never in living bought on spot prices. As often repeated, Enemalta tenders out its oil requirement on a yearly basis and pays the supplier the average Platts price for the whole current month unless the supplier elects to go for the (yet unknown) average price for the next month.

Fact 2 - The journalist compounds his evident lack of knowledge in this field by using the spot currency conversion price for the $/€ - imagine if Enemalta had to work that way in the present financial turbulence. Obviously, he completely ignores the oft-repeated statement that Enemalta relies on Central Bank expertise to guide its currency procurement policies and Enemalta would rather continue with that policy rather than assuming that the correspondent is an expert.

Fact 3. The correspondent's logic is that Enemalta should have bought all its 2009 fuel supplies on January 21 at the price and the currency levels of the day since this would have brought its 2009 cost to €135 million against a budget of €216 million. Sure, could have done that but what if... Some very simple examples: the following day, fuel oil was actually €9 per tonne lower so if we had waited a day we would have been even better off! But two days later it was €20 higher than on January 21 so we would have paid more. The next day it fell by a whopping €25... and so it goes on. Should we maybe call Mr Sansone to decide the day we should buy "spot"?

Fact 3. Only last week the Minister once again repeated in Parliament that the benchmark oil target for 2009 is €216.3 million and it is against that benchmark that tariffs will move up and down come end of March 2009. The writer, however, advocates a new way. He expects Enemalta to choose a spot price on any given day, compare it to the yearly benchmark and move tariffs accordingly which would mean that tariffs would move practically every week since we are seeing 15 per cent fluctuations on a regular basis. No one in the world calculates tariffs that way - industrialists, businessmen and investors would shoot us if we did.

Fact 4. This time coming from an anonymous analyst! After making the gratuitous and fictitious assertion that Enemalta buys at prices that are "slightly higher than international quoted prices" (see above for the price Enemalta buys at), he then goes on to invent another howler when he asserts that Enemalta uses a "forward buying mechanism" to buy oil. Once again, it has been stated more than once that Enemalta has never bought oil forward, never, never, never, and please do not respond that "forward buying" is the same as "hedging" because it would merely reaffirm how whoever said this does not understand the fundamentals of the oil market.

Fact 5. The correspondent builds his article on a comparison of January 2009 prices to October 2008 prices, when he clearly knows (because he reports it in a separate part of the article) that the benchmark is not October 2008 because the prices used to build the 2009 budget are much, much lower than the averages for October 2008. Using July 2008 would have provided him with an even larger differential but he would have still been incorrect.

Finally, one question. We sent the correspondent a comparison between actual bills today and the bills how they would have been had the surcharge system been retained.

How come he chose not to publish? Maybe because they show that the present bills are much, much lower than had the surcharge system been retained?

Editor's note

The bills comparison table sent by the ministry was deemed irrelevant to the issue dealt with in the article. The fundamental question asked by the reporter was by how much has the price of oil for the corporation fluctuated since the tariffs were introduced. The comparison was made with October 2008 prices since these were the prices quoted by Enemalta's auditors KPMG in drawing up the current tariffs. Even if the reporter's comparison was incorrect, and there has not been a 15 per cent fluctuation from the base, the ministry did not give figures to back up that assertion. It is these figures that the reporter was trying to obtain, as was obvious from his questions.