Based on our latest estimates (released last week) at Bayan (Bagong Alyansang Makabayan or New Patriotic Alliance), oil firms collect about P167.03 million in extra profits daily from consumers due to continued overpricing.

The Big Three oil firms accumulate an estimated P138.14 million every day from overpriced petroleum products. Petron Corporation accounted for P64.64 million daily of the said amount; followed by Pilipinas Shell, P49.94 million; and Chevron Philippines, P23.55 million. A distant fourth is Total Philippines, which like the Big Three is also a local unit of a giant foreign oil firm, with P7.52 million a day. The rest of the oil players combined for P21.38 million.

As of mid-June 2009, oil products in the country are still overpriced by an average of around P4.31 a liter. This amount is lower than the much publicized P8 per liter overpricing as computed by Secretary Ralph Recto of the National Economic and Development Authority (NEDA).

To be exact, NEDA’s estimates peg the overpricing of gasoline at P5.27 to P7.89 per liter (using four different methodologies). There are a number of possible reasons for difference in overpricing estimates of Bayan and NEDA. One is that Recto’s estimates looked at gasoline products only, while our estimates computed the weighted average retail price of ALL petroleum products including gasoline products, kerosene, diesel, and liquefied petroleum gas (LPG).

Nonetheless, what must be emphasized is not the differences in overpricing estimates but that Department of Energy (DOE) Secretary Angelo Reyes should not simply dismiss the overpricing issue because independent studies such as Bayan’s and think tank IBON Foundation have alleged that oil firms are overpricing long before the NEDA chief came out with his own computation.

The point is there is overpricing. And the issue is what are the policy makers and the executive doing about it?

We must recall as well that Mrs. Gloria Macapagal-Arroyo herself has once pointed out that oil firms in the country are “not reflecting the price of crude oil in the global market”. In November last year, Mrs. Arroyo “urged” oil companies to bring down prices to July 2007 levels to mirror the drastic decline in world crude oil prices then. But such appeal was apparently useless because government has no power to require the oil companies to implement fair prices and adjustments in a deregulated environment.

Persistent allegations of overpricing, or that oil firms are “not  reflecting the price of crude oil in the global market”, from various quarters should be enough reason to compel lawmakers to repeal Republic Act (RA) 8479 or the Oil Deregulation Law. An entirely new set of measures must be put in place to regulate adjustments in oil prices and protect consumers from unreasonable oil price hikes.

We computed the “ideal” adjustment in prices using the monthly averages of Dubai crude and the foreign exchange rate from January to June 1-16. The results were then compared to actual adjustments per month (including June 1-16) in pump prices to arrive at its overpricing estimates. To calculate the projected profiteering, we used the actual sales in petroleum products last year, which was pegged at 277 thousand barrels per calendar day (MBCD), and actual market share of each oil company in the first half of 2008.