Amid a looming oil crisis precipitated by the attacks on Saudi Arabian plants that effectively shut down 6% of global oil supply, oil companies in the Philippines can still afford not to raise prices. This is because they have overpriced domestic petroleum products to the tune of Php4.38 per liter for gasoline and Php1.80 for diesel from January 2018 up to the first week of September 2019.
This “overpricing” is the result of the oil firms implementing price adjustments that do not properly reflect movements in global price benchmarks, in particular the Mean of Platts Singapore (MOPS) for diesel and gasoline, as well as fluctuations in the US and peso foreign exchange (forex) rates. To illustrate, the net price adjustment for diesel in 2018 based on MOPS and forex was a rollback of Php2.08 per liter. But the actual price adjustment was a rollback of only Php0.60, or a difference (overpricing) of Php1.48 per liter. For 2019, up to the first week of September, the actual price hike for diesel was Php3.15 per liter when the adjustments should have only been Php2.83, or a difference of Php0.32 per liter.
Similarly, there should have been a net rollback of Php5.83 per liter for gasoline in 2018, but the actual reduction was only Php2.35 or a difference of Php3.48 per liter. For 2019, as of the first week of September, the total adjustment in gasoline prices should have only been Php3.25 per liter, but actual price hikes have reached Php4.15 per liter at that point, or a difference of Php0.90 per liter.
So-called global price benchmarks like MOPS, of course, do not show the actual price of oil, which tends to be artificially high because of global oil monopolies that dictate supply and prices. With or without an oil price hike, prices are bloated because of global monopoly control by the oil giants like Shell and Chevron. But on top of this monopoly price, oil firms even profit more by taking advantage of lack of government control on domestic prices and supply. Under oil deregulation, oil firms hike or roll back local pump prices by much higher (in case of price hikes) or lower (in case of rollbacks) than the movements in global benchmark prices and forex.
Can Duterte curb this abusive practice of the oil companies? Not under Oil Deregulation Law, which took away government’s capacity to regulate and ensure fair domestic prices and price adjustments. Will Duterte stop local oil overpricing? Not if his government is raking in about Php7.72 million every day in additional VAT (value added tax) revenues on overpriced diesel and gasoline.