JAMAICA’S sole oil refinery, Petrojam, doubled its expectations for profit amidst. high gas prices this fiscal year.

In a mid-year revision of estimates of revenue and estimates, the Government-run refinery upped projections for net profit from $2.8 billion to $5.6 billion.

The improved profit performance reflects lower revenues — $166.5 billion compared to $82.7 billion estimated in April — but even higher reduction to cost of sales, which is expected will be $20 billion lower than originally projected for the current fiscal year that runs to March 31, 2012.

The upshot is a 40 per cent increase in its outlook for gross profit margin from $10.1 billion to $14 billion.

Gas prices have been steadily rising over year-earlier levels since the start of the year and as at September 8, 2011 stood 31 per cent higher than a year before.

Petrojam maintains, however, that the pricing mechanism it uses reflects a practice used by its main oil trading counterparts — Mexico, Venezuela and Trinidad.

“Ex-refinery prices are adjusted weekly to ensure that local prices are consistent with prices in the oil market,” said an advertisement placed by the refinery over the weekend. “While changes in the market prices of crude oil are generally reflected in the refined product prices, this is not the only determinant of product prices.

The main input into the pricing formula is the US Gulf Coast (USGC) Reference Price for the appropriate product.

“The wholesale price of gasoline in the US Gulf is up 45 per cent on its year-ago price in August 2011” while by comparison, “Petrojam’s ex-refinery gasoline price is up only 27 per cent on year-earlier levels,” the ad said.

Other components include logistics costs and taxes. Incidentally, the Government reduced the ad valorem tax on fuel by five percentage points in April 2011.