Tag Archives: oil overpricing

Oil deregulation

A billion pesos daily in extra profits, taxes for oil firms, BBM

Image from The Manila Times

The oil companies and the Marcos administration are earning almost a billion pesos per day in extra profits and taxes due to unreasonable weekly changes in pump prices. 

As the public grapple with high prices, it appears that the oil firms and the government are making a killing from the perverse and speculative adjustments in the prices of petroleum products.

Making a killing

For diesel and gasoline alone, they are collecting an additional income of around ₱966.33 million per day. Of the said amount, the oil companies take some ₱850.37 million per day in extra profits while the government collects about ₱115.96 million daily in additional value-added tax (VAT) revenues.

The amounts are based on the estimated overcharge that oil firms implement weekly. As of the Oct 18 price adjustments, diesel price changes are around ₱25.48 per liter higher than what is supposedly warranted by movements in international benchmark prices and the foreign exchange. For the same period, the estimates for gasoline are pegged at ₱12.27 per liter. The estimates used the benchmark Mean of Platts Singapore (MOPS), which the Department of Energy (DOE) says is the reference for determining local pump price movements. 

The estimated overcharge from the weekly price fluctuations is compared to the country’s diesel and gasoline consumption to reckon how much the oil firms and the government potentially make in additional profits and VAT revenues. In 2021, the demand for diesel was 10,590 million liters (ML), while it was marked at 6,757 ML for gasoline, according to the Oil Industry Management Bureau (OIMB).

Most of the extra profits the oil companies raked in went to the industry’s biggest players, based on their market share as of 2021. Petron, which accounts for 19% of the downstream oil market, cornered about ₱163.02 million daily. With a 15% market share, Shell gained around ₱127.21 million daily. Phoenix (7% share) got some ₱63.35 million, and Chevron (5%) was about ₱45.15 million. 

The additional tax revenues that the government amasses from high prices and unfair price adjustments explain why it wants to keep the Oil Deregulation Law despite energy officials recognizing that global price fluctuations are mainly speculative.

Excessive global prices

What we see as apparent price manipulation in the weekly price movements of petroleum products does not fully capture the extent of excessive oil pricing. To illustrate this, one can look at the reported production cost of a barrel of crude oil and compare it with the international benchmark prices. In 2016, for instance, the production cost of crude oil in Saudi Arabia, Iraq, and Iran ranged from just $9 to 11 per barrel. During the same year, Dubai crude averaged $41.47 per barrel – or a difference of $30.47 to 32.47 a barrel.   

Asian countries, including the Philippines, use Dubai crude prices to determine the cost of crude oil (and MOPS for refined petroleum products). In 2021, more than 60% of the country’s crude oil imports came from Saudi Arabia.

Oil importing nations refer to Dubai, MOPS, and other international benchmark prices to determine domestic pump prices and price changes. These benchmark prices reflect the price in the oil spot market – i.e., “on-the-spot purchases of a single shipment for prompt delivery at the current market price,” as defined by the US Energy Information Administration (EIA).

However, these volatile spot prices, prone to speculative assaults, do not accurately reflect the price of oil stored and sold in the local market. Long-term supply contracts, not spot prices, cover most of the physically traded oil and are retailed in refilling stations. Some estimates say the spot market accounts for 35-40% of physical crude oil sales.

In the Philippines, because of a deregulated and privatized downstream oil industry, policymakers and consumers are blind to how much of the oil in the market is covered by spot transactions and long-term supply contracts. We can assume, nonetheless, that the major players with ties to the transnational oil companies operate under the terms of supply contracts and not the spot market.  

Financialization and speculation

Meanwhile, the greater financialization of the global oil futures market since the early 2000s paved the way for increased speculation in oil commodities that impact spot prices. According to the EIA, the futures market is where futures contracts (i.e., a standard agreement to buy or sell a specific commodity of standardized quality, such as crude oil, at a certain date in the future) are bought and sold. 

The EIA explains, ” If oil producers want to sell oil in the future, they can lock in their desired price by selling a futures contract today. Alternatively, if consumers need to buy crude oil in the future, they can guarantee the price they will pay at a future date by buying a futures contract.”

But increasingly, under a highly financialized global economy, participants in the futures market are not only those with an actual commercial interest in buying and selling physical oil. They now include financial players who merely want to profit from the rise and fall in oil prices. 

“In addition to oil producers and consumers, futures contracts are also bought and sold by market participants or speculators who do not produce or consume crude oil. These types of traders buy and sell futures contracts in anticipation of price changes, hoping to make a profit from those changes,” the EIA says.  

Beyond fuel taxes

Economic fundamentals cannot explain the erratic behavior of oil prices in the past two decades. Global prices move based on the unregulated betting of big financial players on whether prices will go up or down in the future, taking a cue from emerging global events in geopolitics, economy, and even climate, among others. At one point this year, the pump price of diesel ballooned by ₱13.15 per liter, then fell by ₱11.45 the following week. Supply and demand do not account for these extreme price swings.  

The overpricing that the oil firms impose from the weekly price adjustments alone – on top of what they overcharge on the actual costs of oil, especially by the big global players, and the impact of speculation – makes calls to reduce, suspend or remove oil taxes ultimately inadequate. Removing the VAT and excise tax will provide immediate relief, but they are not enough in the context of escalating prices and price manipulation. Such demands should complement the primary call to end the Oil Deregulation Law, regulate oil prices, and curb manipulation and speculation as an immediate people’s demand. ###

Standard
Oil deregulation

Diesel adjustments overcharged consumers by ₱24, gasoline, ₱12

After five straight weeks of rollbacks, local pump prices are rising again this week with hefty increases. Based on reports, diesel will go up by ₱6.85 per liter; gasoline by ₱1.20; and kerosene by ₱3.50.

These latest adjustments will bring the total price hikes in the pump price of diesel to ₱35.80 per liter after 23 weeks of price increases and 18 weeks of rollbacks. Gasoline pump price will have a net gain of ₱15.65 a liter (23 weeks of hikes and 16 weeks of rollbacks), while kerosene, ₱26.75 (23 weeks of hikes and 18 weeks of rollbacks).

Oil prices have generally been moving downwards since the year’s second half. Between Jul 5 and the latest adjustments (Oct 10), prices declined in 12 of the 15 weeks. But the rollbacks are not enough to offset the massive price hikes at the start of the year, resulting in net increases.

What’s more, the adjustments are too little compared to what international benchmark prices and foreign exchange say the rollbacks should be (or too high in case of price hikes). For the year, the price adjustments the oil firms implemented up to Oct 4 overcharged consumers by as much as ₱24 per liter. For gasoline, the overprice is around ₱12 per liter.

As usual, speculation in the global market drove the oil price hikes this week, not the actual supply and demand. The Department of Energy (DOE) cited the Organization of Petroleum Exporting Countries (OPEC) plan to reduce production by two million barrels per day. If it is only a plan, why do oil prices have to go up now?

Overpricing through the weekly price adjustments and speculation – on top of the big transnational oil companies’ monopoly pricing in the global market – oppress the people because of oil deregulation. The lack of policy tools that will curb the abusive pricing of oil firms forces ordinary motorists, public transport drivers, commuters, farmers, fishers, small eateries, and households to pay for excessively priced oil.  

Neoliberal policies like the Oil Deregulation Law only line the oil companies and corrupt bureaucrats’ (through the petroleum taxes they collect) pockets at our expense. This oppression must stop. ###

Standard
Consumer issues, Oil deregulation

Why are oil prices rising, and what we can we do about it?

Photo from SunStar

Since the start of the year, local pump prices have increased significantly. The government, as always, explains this as the operation of global market forces. Remember that the government deregulated the oil industry, and the country imports almost all its petroleum needs. As such, local price adjustments merely reflect the movement of international oil prices and fluctuations in the peso-dollar exchange rates. At least, that is what government and the oil firms want us to believe.

₱4-5 overpricing at the pump this year

But this explanation is not as straightforward as it appears to be. Pump price adjustments do not reflect global price movements. As of the first week of October, the price of gasoline in the Mean of Platts Singapore (MOPS) gone up by about ₱11.49 per liter. Meanwhile, the pump price of gasoline as of Oct. 5 has jumped by ₱16.55 per liter – ₱5.06 higher than MOPS. The same thing is true with diesel. MOPS diesel increased by around ₱10.86 per liter while the pump price of diesel surged by ₱15.00 – a difference of ₱4.14 per liter.

MOPS is the benchmark that the country uses for local petroleum products, according to the Department of Energy (DOE). It is “the daily average of all trading transactions of diesel and gasoline as assessed and summarized by Standard and Poor’s Platts, a Singapore-based market wire service.”

The difference between the adjustments in MOPS and actual price changes at the pump is a form of overpricing that has thrived under the Oil Deregulation Law. This 25-year-old law allows oil companies to implement automatic price adjustments based on global price movements. 

By implementing higher price hikes or lower rollbacks than international price adjustments, oil firms and the government can collect billions of pesos in extra profits and taxes. Overpriced gasoline and diesel, for instance, gave them an estimated ₱38.47 billion in additional income, of which ₱4.62 billion went to the government as value-added tax (VAT). This exploitation of the consumers by the oil companies and government becomes even more reprehensible amid the pandemic that has massively wiped away jobs and incomes.

In other words, regardless of whether oil prices are up or down, deregulation allows oil companies to earn additional profits. But the situation for the consumers becomes doubly burdensome when oil prices are rising. There have been 32 rounds of oil price hikes for gasoline and 31 for diesel already this year, including the past seven straight weeks. Diesel, at one point, saw its pump price go up for 14 consecutive weeks between April and July.

The direct cause and effect relationship between higher oil prices and faster inflation means more significant distress for most people battered by COVID-19 and the economic crisis. This year, the prices of essential goods and services are moving nearly twice as fast compared to the first year of the pandemic. The inflation rate from January to August averaged 4.4%; during the same period last year, it was at 2.5 percent.

Rising global prices amid speculation

Global oil prices are much higher this year than in 2020, which most analysts credit to the rebound in demand amid tight supply. Economies are recovering from the impacts of pandemic lockdowns, and they need more oil for increased production, estimated at an extra 450,000 barrels per day (BPD) through the rest of the year. There were calls to boost global output by as high as 800,000 BPD amid pressure from the world’s largest oil consumers like the US, accounting for more than 20% of global oil consumption. 

But members of the Organization of the Petroleum Exporting Countries (OPEC) and their partners (collectively, the OPEC+) are only increasing output by 400,000 BPD. OPEC+, led by Saudi Arabia and Russia, earlier tightened oil supply when global prices collapsed due to the pandemic last year. 

Looking at commodity prices compiled by the International Monetary Fund (IMF), the July price index of the world’s three major spot prices for crude oil (i.e., Brent, West Texas Intermediate or WTI, and Dubai) was its highest monthly average since November 2018. From January to August this year, the average spot prices ($65.14 per barrel) for crude oil are 61% higher than during the same period last year ($40.47 per barrel). More updated weekly data quoted in news reports say that Brent spot prices reached a three-year high of $83.47, and WTI reached a seven-year high of $79.35.

However, as usual in neoliberalism, much of the price increases in the global oil markets are driven by speculation and not by the actual supply and demand. This speculation is being fueled this time by how the global health crisis could further develop. OPEC+ members are reluctant to supply the market with more oil out of fear that demand and prices could weaken again all of a sudden due to another wave of COVID-19 infections. The opposite side of this is the bullish outlook that global economic recovery from the pandemic will remain faster than expected, with speculators from Goldman Sachs and the Bank of America projecting oil prices to climb further up to $90 to $100 per barrel. The last time global spot prices averaged more than a hundred dollars was August 2014. Meanwhile, traders, especially those in the futures markets, also speculate that demand could further increase due to the colder than anticipated winter season amid the climate crisis.

The Philippines is especially vulnerable to global supply and demand speculation because the country is a heavy consumer and big importer of petroleum. Out of 214 countries worldwide, the Philippines ranks top 36 in terms of oil consumption. In the first half of 2021, the country imported 10.03 billion liters of finished petroleum products and 1.21 billion liters of crude oil to meet the domestic demand of 67.70 million liters per day. The oil import bill went up by 55.9%, from $3.07 billion in the first half of 2020 to $4.79 billion in the same period this year due to higher import volume and rising global prices.

Ending oil deregulation is a must

Deregulation fully exposed the country to the price impacts of speculative activities by oil producers, traders, investment firms, and other financial institutions that exploit the uncertainties in the world market. As mentioned, oil companies can automatically implement price adjustments based on international price fluctuations under a deregulated regime.

The continued domination of monopoly corporations in the oil industry, which can dictate how much local pump prices would move, further exacerbated such vulnerability. Only four companies (Petron, Shell, Phoenix, and Chevron) control 47.2% of the domestic oil market, and just one (Petron) retain 100% of the country’s crude oil refining capacity. These companies are tied to the transnational corporations in oil and finance through investments, long-term supply contracts, and other strategic partnerships.

With deregulation, the government abandoned its mandate to guarantee oil supply security and protect the economy and people from excessive petroleum prices. Policy tools to regulate prices and safeguard supply are always necessary but are even more crucial today as the country tries to get back on its feet from the impacts of the pandemic. 

Reminding oil companies to ensure the country’s oil supply which is the only “intervention” that the DOE has done amid surging prices, is extremely not enough. The government itself must play the leading role in stockpiling fuel supply through, for instance, a system of centralized procurement of imported oil. Under this system, oil companies will have to buy from the state-owned Philippine National Oil Co. (PNOC). Oil firms thus will have to sell it at a price based on PNOC’s cost of importation, which is cheaper than commercial deals as the government can explore various ways to get discounted prices or even waive taxes. In addition, the government can quickly determine if the oil firms are profiteering or selling at a price that is outrageously higher than the cost of buying from the PNOC.There are numerous policy options and possibilities, but it must start at ending the oil deregulation regime. ###

Standard
Oil deregulation

Duterte backers, other oil firms rake in millions from overpricing amid pandemic

Amid the misery and deaths caused by COVID-19, oil companies, including those controlled by prominent Duterte backers, have been raking in millions of pesos in extra profits from overpricing. This is beyond unconscionable and appalling as the socioeconomic fallout of the pandemic – i.e., record joblessness, hunger and poverty – continues to burden the people.

How oil firms manipulate prices

With the pandemic raging last year, the oil firms imposed a net overpricing of about PHP 4.96 per liter for gasoline and around PHP 2.86 per liter for diesel. The overpricing continued in the first three months of 2021, as the country suffers an even worse surge in COVID-19 cases. For gasoline, the overpricing is estimated at around PHP 0.71 per liter as of end-March this year; for diesel, it is pegged at PHP 0.88 per liter.

These estimates were computed by comparing the supposed adjustments in prices based on the weekly fluctuations in international oil prices and the foreign exchange rate, and the actual adjustments in local pump prices implemented by the oil companies.

Last year, oil prices saw a sharp decline as the global economy came to a standstill with countries enforcing months of lockdowns to contain the spread of the novel coronavirus. Based on the International Monetary Fund’s (IMF) monitoring of primary commodity prices, the price of Dubai crude oil fell from USD 63.73 per barrel in January 2020 to as low as USD 23.38 per barrel in April. It finished the year with a monthly average of USD 49.32 per barrel in December.

Consequently, local pump prices in the Philippines, one of the world’s most oil import-dependent economies, also declined. According to the monitoring of the Department of Energy (DOE), oil companies implemented a net price rollback of PHP 1.97 per liter for gasoline and an even bigger PHP 5.96 per liter reduction in the price of diesel. 

But these price rollbacks are much smaller than what the oil firms should have implemented if they were simply reflecting movements in global prices, as they and the DOE are wont to say. Based on the Mean of Platts Singapore (MOPS), the international benchmark used by the Philippines in pricing petroleum products, and the fluctuations in the peso exchange rate to the US dollar, the price of gasoline should have gone down by about PHP 6.93 per liter. Similarly, the price of diesel should have been rolled back by PHP 8.82 per liter.

Comparing these to the actual adjustments per liter in pump prices that the oil firms implemented and the DOE allowed (i.e., rollbacks of just PHP 1.97 for gasoline and PHP 5.96 for diesel), the overpricing estimates of PHP 4.96 per liter for gasoline and PHP 2.86 per liter for diesel were calculated.

For 2021, even as global oil prices continued to pick up, the price of gasoline should not have gone beyond PHP 5.44 per liter in total increases based on MOPS price movements from January to March; but the oil companies hiked their gasoline prices by a total of PHP 6.15 per liter during the period, resulting to an overpricing of PHP 0.71 per liter.

Similarly, the price of diesel based on MOPS should have not increased by more than PHP 3.72 per liter. However, oil firms have already jacked up their diesel prices by P4.60 per liter, resulting to an overpricing of PHP 0.88 per liter.

Duterte regime, allies gain from overpricing 

Deregulated oil prices under Republic Act 8479 or the “Downstream Oil Industry Deregulation Act of 1998” allows oil firms to adjust pump prices – supposedly as dictated by global market forces (e.g., international prices and exchange rates) – without the benefit of public consultation. Such neoliberal policy in oil price setting has only enabled the oil companies to abuse the consumers with impunity. 

It must be emphasized that the overpricing estimates based on so-called global market forces do not illustrate the magnitude by which foreign oil monopolies such as Shell, Chevron, etc. artificially inflate prices. Such estimates merely show how oil firms under a deregulated regime can easily further manipulate oil prices through implementing adjustments that are above (in case of price hikes) or below (in case of rollbacks) the supposedly justified amounts based on international price benchmarks.

A crisis as grave as the COVID-19 pandemic should have been an opportunity to review and reverse this flawed policy. Unfortunately, it is clear that President Duterte, his political clique, and the neoliberal champions in his economic team will not entertain such policy turnaround to protect the public. 

For one, with its obsession to collect taxes to appease creditors for its debt-driven infrastructure projects, oil overpricing provides additional revenues for the Duterte regime. Based on a rough approximation of petroleum demand in 2020 of about 14.69 million liters per day for gasoline and 24.32 million liters per day for diesel (reflecting the overall decline in demand of 23% in the first half of 2020 due to the pandemic, as reported by the DOE), it can be guesstimated that the total additional profits generated by the oil firms from overpricing gasoline and diesel is about PHP 142.50 million a day. Of this amount, PHP 17.10 million went to government in the form of the 12% value-added tax (VAT).

For another, Duterte’s political backers and their foreign partners with interests in the oil industry benefit hugely from oil overpricing. Due to overpricing, it is estimated that Petron Corp. earned PHP 23.19 million daily in 2020 on top of its regular profits based on market share. The largest oil refining and marketing company in the Philippines, Petron is majority owned by Ramon Ang’s San Miguel Corp. (SMC). Ang is among the tycoons who financed the presidential campaign of Duterte in 2016 and appears to be one of the most favored oligarchs by the administration, cornering big-ticket infrastructure contracts such as the controversial PHP735.6-billion Bulacan aerotropolis.

Dennis Uy, the Davao-based businessman and longtime ally of Duterte, also continues to make a fortune in the oil industry through Phoenix Petroleum, which in terms of market share (7% in 2019) ranks as the fourth largest oil retailer in the Philippines behind the old Big Three of Petron (25%), Shell (18%) and Chevron (8%). Uy and Phoenix Petroleum had a declared campaign contribution of PHP 36 million to Duterte’s presidential campaign in 2016. Based on market share, it is estimated that Phoenix raked in PHP 8.85 million daily in extra profits last year from overpricing.  

Uy has seen his wealth grow tremendously under Duterte, including in the Philippine oil and gas industry where he has been expanding and consolidating his interests. Last year, Uy’s Udenna Corporation bought the 45% stake of Chevron in the Malampaya natural gas field and plans to partner with government through the Philippine National Oil Company (PNOC) to acquire as well the 45% stake of Shell. ###

Standard
Consumer issues, Oil deregulation

Amid Saudi attacks, no need for oil price hikes

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.

Standard
Consumer issues, Oil deregulation

Oil firms overpriced gasoline by Php3.48 per liter in 2018; diesel by Php1.48

photo_verybig_7124
(Photo: Novinite.com)

After a series of oil price cuts that started from mid-October 2018 up to the first week of the new year, domestic pump prices have begun to climb up again. The recent increases are due to the combined impact of rising global oil prices and of the second tranche of additional excise tax on oil products under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

For consumers, it is bad enough that they are made to shoulder a heavier tax burden from a commodity as vital as oil. It is even greater injustice that they are forced to pay for overpriced oil and for even bigger fuel taxes due to such overpricing.

As oil firms are wont to do in a deregulated regime, they implemented price adjustments in 2018 that were higher than what were justified (at least based on Department of Energy or DOE standards) by the weekly changes in global benchmark prices as well as foreign exchange rates.

For 2018, oil companies overpriced gasoline by an estimated Php3.48 per liter and diesel by about Php1.48 per liter. (See Table 1)

tab 1 summary of overpricing 2018

The figures were based on the estimated impact on local pump prices of the weekly adjustments in the Mean of Platts Singapore (MOPS) prices of gasoline and diesel, as well as of the peso-US dollar exchange rates. The results were then compared to the actual price adjustments implemented by the oil companies. According to the DOE, the Philippines uses the MOPS prices as benchmark for pricing finished petroleum products that are retailed in the country.

Put another way, oil firms were implementing higher price hikes when global prices were rising and lower price rollbacks when global prices were falling. This means that consumers were still being abused by the oil companies even as they were rolling back prices in the last three months of 2018. In fact, looking at Table 1, the oil firms overpriced more during the successive weeks of price rollbacks in October to December.

The Oil Deregulation Law (Republic Act 8479 or the “Downstream Oil Industry Deregulation Act of 1998”) and its regime of price adjustments without public consultations created the environment for such abuse to be committed with impunity.

These allowed the oil firms to rake in around Php33.93 billion in extra profits last year on top of their regular income, and the Duterte administration to collect some Php4.63 billion in additional revenues from the 12% value added tax (VAT). Apparently, it is not in the interest of the government to regulate oil price adjustments because of the tax windfall that high and overpriced oil generates. (See Table 2)

tab 2 summary extra profits & vat 2018

It is important to stress that the “overpricing” based on the MOPS and forex movements does not in any way represent the true extent of how much prices are artificially bloated due to the monopoly control of big oil companies in the global and local markets. It just illustrates how deregulation can be easily abused by the oil firms operating in the country through implementing adjustments that are beyond the supposedly “justified” amounts by so-called international benchmarks such as the MOPS.

Oil price unbundling

During the height of unabated oil price hikes at the start of 2018, the DOE initiated its proposal to unbundle the prices of petroleum products. The latest is that the DOE is already finalizing a circular to implement the proposed unbundling meant to put more teeth in monitoring oil prices and protect the consumers. Industry players and energy officials have already agreed on seven out of the eight major components of the unbundled price.

Understandably, the remaining contentious item in the planned unbundling is the “industry take”, which indicates the profit margin and operation cost of the oil companies. Nonetheless, the DOE expects to finally issue the circular by the first quarter.

While unbundling could make the cost breakdown per liter of fuel products seem more transparent, it will still not guarantee fair price setting. Adjustments in prices will remain deregulated and oil firms, especially the largest ones, can continue to abuse the weekly price adjustments and overprice their products. This is similar to the unbundling of electricity rates in the privatized and deregulated power industry, which did not stop the abusive pricing practices of the big power monopolies.

Besides, real transparency in prices requires that all oil companies disclose their term contracts with their suppliers, detailing key information such as the specific source/supplier of imported oil, the actual negotiated import price, volume of oil imports, etc.

Impact of the TRAIN Law on oil prices

Compounding the overpricing by the oil companies is the additional fuel tax imposed by the Duterte administration. The TRAIN Law (or Republic Act 10963) will add another Php2 per liter in excise tax to the pump prices of gasoline and diesel; Php1 per liter for kerosene; and Php1 per kilogram (kg) for liquefied petroleum gas (LPG). Including the 12% value added tax (VAT), the second round of tax hike under the TRAIN Law will increase the price of gasoline and diesel by Php2.24 per liter; kerosene by Php1.12 per liter; and LPG by Php1.12 per kg.

In 2018, the controversial tax scheme of the Duterte administration already added Php2.80 to the price of diesel; Php2.97 for gasoline; Php3.36 for kerosene; and Php1.12 per kg for LPG, representing the additional excise tax and the corresponding VAT. Adding to this year’s adjustments, the TRAIN Law’s total price impact as of 2019 would be an increase in the pump price per liter of diesel by Php4.80; gasoline by Php5.21; and kerosene by Php4.42. For LPG, the total price hike is Php2.24 per kg or a total of Php24.64 for the usual 11-kg cylinder tank that households use.

The bad news is that there remains still another tranche of excise tax increases next year under the TRAIN Law. The scheduled increases for 2020, including the VAT, are: diesel, Php1.68 per liter; gasoline and kerosene, Php1.12 per liter; and LPG, Php1.12 per kg. Table 3 summarizes the impact of the TRAIN Law on oil prices.

tab 3 train impact on oil prices

As of the latest price adjustments (i.e., Jan 15, 2019) and including the second tranche of fuel excise tax under the TRAIN Law, the pump price of diesel is more than Php12 per liter higher than its level before the Duterte administration took over; gasoline is almost Php9 higher. Of the said price increases, the additional tax burden (i.e., excise and VAT) imposed by the TRAIN Law accounted for Php5.04 per liter for diesel (41% of the total price increase in diesel under Duterte) and Php5.21 per liter for gasoline (59% of the total increase in the price of gasoline). (See Table 4)

tab 4 oil price before & under duterte jan 2019

If policy makers were to truly address the problem of high oil prices, they should look at both the TRAIN Law and the Oil Deregulation Law. Removing the unnecessary fuel tax burden and making oil taxation more progressive will immediately bring down the price of oil for sure. But oil prices will remain exorbitant and price adjustments will remain unjustified as long as the oil industry is deregulated. ###

Standard
Oil deregulation

Oil firms, government earn almost PHP10 M daily extra income from unjustified price hikes

(Photo from Inquirer.net)

Taking advantage of deregulation, it appears that oil companies continue their abusive practice of implementing oil price hikes that are bigger than what the world market supposedly warrants. This allows them to pocket extra profits on top of their regular net income, as the government also reaps windfall tax revenues at the expense of consumers.

Looking at local oil price movement from the start of the year up to the third week of March, the price adjustments in diesel may have been overpriced by 24 centavos per liter and gasoline by 15 centavos per liter. This resulted in about PHP9.67 million additional collections every day from diesel and gasoline products for the oil companies. Of this amount, PHP1.16 million daily go to the Duterte government’s value-added tax (VAT) collections. (Note that the administration has also been collecting additional excise taxes from oil products this year under the Tax Reform for Acceleration and Inclusion or TRAIN law.)

The Department of Energy (DOE) and the oil companies explain that domestic price adjustments merely reflect the movement in global oil prices plus the fluctuations in the foreign exchange (forex). For the Philippines, the international benchmark for refined petroleum products is the Mean of Platts Singapore (MOPS). Since the country’s oil industry was deregulated more than two decades ago, these adjustments have been automatic.

But based on the weekly MOPS adjustments and forex fluctuations as posted in the DOE website, the price adjustment in diesel for the year should have only been around PHP1.31 per liter (as of March 20) while the actual net price hike reached PHP1.55 during the period. The same thing is true for gasoline which posted a net increase of PHP1.05 per liter when the adjustment should have only been about 90 centavos per liter.

The process of estimating the price adjustment is pretty straightforward. Oil companies claim that price adjustments for the present week is determined by MOPS price adjustments (expressed in US dollars per barrel) and the average forex in the past week. For instance, if last week the MOPS diesel increased by US$2 per barrel with the forex pegged at PHP50 per dollar, how much should the price hike be in local diesel prices for the current week?

Step 1 is to convert the MOPS price adjustment into PHP per barrel. So, US$2 x PHP50 = PHP100 per barrel.

Step 2 is to convert the MOPS price adjustment into PHP per liter. One barrel has 158.99 liters. So, PHP100 / 158.99 = PHP0.63 per liter.

Step 3 is to include the 12% VAT to get the final estimated adjustment. So, PHP0.63 x 1.12 = PHP0.70 per liter.

Thus, a US$2-per barrel increase in MOPS diesel at PHP50 forex rate in the previous week translates to a 70-centavo price hike in the domestic price of diesel in the current week. Anything above 70 centavos is “overpricing”.

It is important to stress that the “overpricing” based on the MOPS and forex movements does not in any way represent the true extent of how much prices are artificially bloated due to the monopoly control of big oil companies in the global and local markets. It just illustrates how deregulation can be easily abused by the oil firms operating in the country through implementing adjustments that are beyond the supposedly “justified” amounts by so-called international benchmarks such as the MOPS.

With the Philippines being one of the world’s most oil intensive economies, even the several centavos that oil companies overcharge through questionable price adjustments already translate to massive extra profits for the oil industry.

Using domestic consumption data as of the first half of 2017 from the DOE, oil firms are earning (excluding the VAT, which goes to the government) an estimated PHP6.25 million daily in extra profits from diesel and PHP2.26 million daily from gasoline. These are derived at by multiplying the 24-centavo estimated overpricing in diesel by the diesel consumption of about 29.34 million liters daily; and the 15-centavo estimated overpricing in gasoline by the gasoline consumption of around 16.66 million liters daily.

Based on market share (as of first half 2017, based on DOE report), the Big Three which continues to dominate the local market after more than two decades of deregulation, cornered 56% of the estimated daily extra profits of the oil firms – Petron, PHP2.43 million daily; Shell PHP1.76 million; and Chevron PHP0.56 million.

Again, these guesstimates merely scratch the surface by comparing local and international price changes. In reality, with or without price adjustments, big oil companies that run and control the global oil industry – from the vast oil fields in the Middle East all the way to your neighborhood gas stations, and all the technology and infrastructure that keep this massive network together – retail petroleum at prices many times their actual production costs.

To illustrate, the Philippines imports 79% of its crude oil from just three countries – Saudi Arabia, 35%; UAE, 28%; and Kuwait, 16% (as of first half 2017, according to the DOE). The production costs of crude oil in these countries, based on 2015 data (as cited by CNN Money), are just US$9.90 per barrel for Saudi Arabia; US$12.30 for UAE; and US$8.50 for Kuwait.

Yet, in 2015, Philippine domestic prices were based on the posted price of around US$51.23 per barrel (2015 average posted price of Dubai crude, based on International Monetary Fund or IMF monitoring). This means that oil firms in the Philippines pegged pump prices at crude oil prices that are about four to six times the actual production costs.

Under deregulation, the government has abandoned its responsibility to determine if domestic oil prices – whether in terms of price adjustments based on global prices or more importantly, in terms of reasonable prices based on production costs – are justified or not. The public’s burden is aggravated more by price speculation in the global oil market that further artificially drives up local prices which consumers fully bear because of deregulation. #

 

Standard
Oil deregulation

No overpricing? Oil review, as usual

Economists Benjamin Diokno (right) and Victor Abola, stalwarts of academic institutions that are known bastions of neoliberalism, led the latest oil price review commissioned by the DOE (Photo from bulatlat.com)

As expected, the Independent Oil Price Review Committee (IOPRC) set up by the Department of Energy (DOE) has cleared the oil companies of overpricing and accumulating excessive profits. DOE officials, of course, were very happy with the findings as they affirmed the position of the department that local pump prices simply reflect global prices. While I haven’t read or heard a reaction from the industry, I’m pretty sure that they’re as happy as the DOE officials.

The main findings of the panel are not at all surprising especially to those who are familiar with similar efforts in the past by the DOE of asking so-called independent experts to review the Oil Deregulation Law (ODL) and pricing practices of oil companies. The IOPRC study is now the third such review in the last seven years commissioned by the DOE to help it justify the unpopular and contentious ODL, and rationalize the high and increasing pump prices. You may download these past reviews, as well as the 2012 IOPRC’s summary of findings, from the following links:

So-called independent oil reviews have been part of the propaganda arsenal of the DOE to temper increasing public discontent due to rising oil prices. It has been the case in the 2005, 2008 and 2012 reviews. Government is using academic institutions like the School of Economics of the University of Asia and Pacific (UA&P) and the University of the Philippines (UP) to create a semblance of objectivity. But the truth is these academic institutions are known bastions of neoliberalism, producing technocrats who design policies like market deregulation and thus, are never neutral.

The 2012 full report has not yet been made public, only the summary of findings that IOPRC head Benjamin Diokno presented to the media last August 5. From what I understand, the full report will be released on August 10 in a public presentation at the UP School of Economics (UPSE), where Diokno is professor emeritus. Thus, a detailed critique of the study may not be possible at this time. But based on what has been shared by Diokno in the media as well as our discussions with the IOPRC during the public consultations, we can already point out some basic defects of the study.

Determining overpricing

During the public consultations, one of the main points raised was how to determine overpricing and excessive profits. Diokno explained that the panel will study price movements in the domestic market and compare them with global prices. We argued that while such approach is useful in determining reasonable price adjustments, it does not answer the question of what is the actual cost of oil as bought from the world market. Determining the actual cost is important because if diesel is imported at, say, ₱25 per liter and retailed here at ₱45 per liter, then the oil companies will have to justify why the ₱20-markup is not overpricing and profiteering.

Thus, we were really insistent that the IOPRC closely scrutinize the supply contracts of the oil firms, especially the four biggest – Petron, Shell, Chevron and Total – which have deep links with the world’s oil giants. Our contention was that the posted spot price of oil such as the Mean of Platts Singapore (Mops) and Dubai crude, which the oil firms claim they use in computing pump prices and which the IOPRC also used in its study, are way too bloated than the actual cost of oil. Our argument was that the biggest oil firms which have ties with the global oil giants buy oil at much cheaper prices than published Mops or Dubai prices. Add to this the impact of massive speculation that further artificially bloats the price of Mops and Dubai crude. Alas, these points, along with pretty much everything we raised during the so-called consultations, were dismissed by the IOPRC.

There was no illusion, of course, that Diokno and his panel will heed our proposals. Nonetheless, its refusal to look at the global supply contracts underscored the biggest flaw of the IOPRC – its faulty neoliberal assumption that free market forces set the global price of oil which will be directly and easily translated to competitive and fair pump prices under a regime of deregulation. This basic flaw had also characterized previous DOE-commissioned studies that arrived at the very same conclusions of the IOPRC. More on this later.

Anyway, we have been pointing out that the global oil industry, in its more than a century of existence, has never enjoyed free competition and has always been under the monopoly control of American and European oil giants, including Shell, Chevron, etc. Despite the rise of the Organization of Petroleum Exporting Countries (Opec), these oil giants have maintained their dominant position through their monopoly over technology, capital, infrastructure, etc., and through the protection of the superior military power of their governments. (See PowerPoint presentation on imperialism and the global oil industry)

The impact on prices of global monopoly control and speculation is mind-boggling. In our updated estimates, as of July 2012, global monopoly pricing and speculation account for some 59% to 73% of global crude oil prices. The basic data came from the US’s Energy Information Administration (EIA) that a barrel of crude oil can be produced with a cost of just $26.63 to $40.46 per barrel (including royalties of around 14% of the spot price), which are way below the posted global price of Dubai crude, the country’s benchmark for crude oil, of $99.22 per barrel, as of July. (See illustration below) The difference of $58.76 to $72.59 per barrel between the estimated production cost and the posted price roughly represents the impact of global speculation and monopoly pricing. Such super-bloated global prices are directly passed on to Filipino consumers because of deregulation.

Meanwhile, the claim of the IOPRC that oil firms are faithfully reflecting global price movements in their local pump stations should also be still re-examined. Based on our own monitoring of the impact of monthly fluctuations in global prices and foreign exchange rate, diesel is overpriced by around ₱10.26 per liter, as of July. This estimate is based on the monthly movement of Dubai crude prices and foreign exchange rates and their estimated impact on local pump prices from 1999 to the present, or the whole period under the current deregulation law (Republic Act 8479). From January to July 2012 alone, diesel has been overpriced by ₱1.64 per liter. (Read Notes on overpricing, which explains the methodology; just be aware that the figures being cited in the Notes are not updated) It must be clarified that the said figures represent local overpricing only – or simply the disparity between monthly changes in global crude prices and domestic pump prices – and thus, do not yet capture the much bigger impact of speculation and monopoly pricing by giant foreign oil companies on petroleum prices as discussed earlier.

A counter-argument that will certainly be made by the IOPRC and the DOE is that they are using Mops prices as benchmark and no longer the traditional Dubai crude in computing domestic pump prices. The only reason for this is that supposedly, the country is importing more finished petroleum products than raw crude oil and thus using the Mops is supposedly more accurate. Also, of the more than 600 players in the downstream oil industry, only two – Petron and Shell – are refiners and import crude oil. But Petron and Shell together account for 58.4% of the market while crude oil imports comprise more than 53% of the country’s total volume of imported oil. Thus, it is erroneous to dismiss Dubai crude and rely exclusively on Mops when estimating domestic pump price adjustments.

Lack of fresh perspective and independence

Why was it so easy for the IOPRC and past review panels to absolve the oil firms? One issue that should be raised with these supposedly independent studies is that the members who conducted the review lack a fresh insight or alternative perspective on the issue of the oil industry. All studies on the ODL and oil prices commissioned by the DOE were carried out by academics and technocrats with the same bias for neoliberal free market and for corporations. Another concern is independence, as it appears that the panel members of these review committees are in one way or another have ties with the oil industry and government.

In 2005, the DOE formed a review body headed by Carlos R. Alindada, retired chairman of giant accounting firm Sycip, Gorres, Velayo (SGV) and a former commissioner of the Energy Regulatory Commission (ERC). In 2008, the DOE tapped the SGV and the University of Asia and the Pacific (UA&P) to conduct a study on the reasonableness of oil prices in the country. It was headed by UA&P’s Dr. Peter U Lee, who incidentally, was also a member of the 2005 Alindada oil review panel.

SGV has among its clients some of the leading oil companies in the country. The UA&P, on the other hand, has always been an advocate of neoliberalism. Described as a private research university, the UA&P was founded as the Center for Research and Communication (CRC) in 1967 by economists Bernardo Villegas and Jesus Estanislao. Villegas and Estanislao were both key economic advisers of the Aquino and Ramos administrations, which implemented the most far-reaching neoliberal restructuring of the economy in the late 1980s and 1990s including the privatization and deregulation of the energy sector and downstream oil industry. Estanislao, who was a former Department of Finance (DoF) and National Economic and Development Authority (Neda) secretary of the late President Cory Aquino, was a member as well of the Diokno-led IOPRC together with UA&P Program Director for Strategic Business Economics economist Victor Abola. The UA&P has recently tied up with Pilipinas Shell in launching the First Shell Sustainable Development in Action Youth Congress, which has become a venue to promote the deregulation of the oil extraction sector, where Shell has a stake through the Malampaya natural gas project.

As UPSE stalwart Diokno, who was also the former secretary of the Department of Budget and Management (DBM) under the Estrada administration, has been a leading proponent of neoliberalism in the country. In fact, he has been a vocal supporter of the ODL and in 2008, when oil prices were escalating to record levels, declared that reviewing the deregulation policy will not solve the problem of high oil prices. During the public consultations held by the IOPRC, he made it clear that there’s no alternative to deregulation, and nationalization is the worst thing that could ever happen to the oil industry. (This, of course, is not true, as there are alternative proposals currently pending in Congress, including a comprehensive oil regulation bill filed by Bayan Muna.) With such thinking, the IOPRC head has apparently already made up his mind even before the “probe” started.

In an attempt to give a semblance of encouraging the participation of marginalized stakeholders, the DOE included in the review panel representatives of the public transport sector and consumers. But like bogus partylist groups and representatives, public transport was not represented by a jeepney or a bus driver but by the lawyer of President Aquino’s Hacienda Luisita Inc., Vigor Mendoza, who chairs the 1-United Transport Alliance (1-Utak), while consumers, on the other hand, were represented by a businessman, Raul Concepcion.

What can we expect from such a line-up of reviewers? Well, aside from absolving the oil firms of overpricing and raking in excessive profits, the IOPRC, again as expected, also revived the proposal of past oil review panels to deregulate the public transport sector to complement the deregulated oil prices. This means more exploitation and is a surefire formula for chaos as it pits commuters and jeepney drivers against each other, when in fact, they are both victims of greedy oil companies and of the deeply flawed deregulation policy. #

Standard
Oil deregulation

Oil overpricing continues despite rollbacks

For the fourth straight week, oil companies rolled back the price of petroleum products. Flying V led the latest round of price cuts, reducing the price of diesel by P0.30 a liter and gasoline by P0.50. Other oil players are expected to follow suit. The Department of Energy (DOE) said that the rollback is due to the stronger peso which offset the increase in global oil prices.

Compared to their end-2011 levels, pump prices this year are still higher by P1.84 per liter for diesel and by P4.40 for gasoline due to the series of price hikes until mid-April.

Local overpricing

But more notably, oil products are still overpriced despite the rollbacks. As of March 2012, diesel is overpriced by around P7.86 per liter and gasoline by P16.18 per liter.

These are based on the monthly movement of Dubai crude and foreign exchange (forex) rate and their estimated impact on the pump price based on a rule of thumb being used by one of the major oil firms.

The estimated impact on the pump price, using the said rule of thumb, varies depending on the respective levels of Dubai and forex in a given month. For instance, in March, Dubai averaged $122.36 per barrel while the forex was pegged at P42.86 per dollar which translates to an estimated impact of P1.20 per liter on local prices for every one dollar increase in Dubai price and for every one peso increase in the forex rate. (See Table 1)

The estimated impact is then compared to the actual adjustments in the pump price. The difference (i.e. when the actual adjustment is bigger than the estimated impact) is considered the “overpricing”. There is “underpricing” when the estimated impact is bigger than the actual adjustment.

The P7.86 per liter for diesel and P16.18 for gasoline represent the accumulated overpricing from January 1999 to March 2012, or the whole period under the 1998 Oil Deregulation Law (ODL). (See Table 2)

Other estimates

Other estimates also show that oil firms are overpricing their products as they take advantage of automatic price adjustments under the ODL. Think tank IBON Foundation, for instance, estimated that diesel prices are increasing 20-22% faster than Dubai crude prices since 1999. Former National Economic Development Authority (NEDA) chief and now Senator Ralph Recto also testified before a Manila court that overpricing could reach P8 per liter.

Global monopoly pricing and speculation

These (local) overpricing estimates simply illustrate that local pump prices increase higher than what movements in global oil price and forex warrant (or smaller in case of rollbacks). They do not represent yet the effect of global monopoly pricing and speculation.

Of the $122.36 per barrel March average of Dubai crude, $78.66 to $92.49 represents monopoly profits and speculation. These estimates are based on US Energy Information Administration (EIA) data that the finding cost of crude oil is only $6.99 to 18.31 a barrel, the lifting cost is only $5.75 to 8.26 a barrel, and royalty is 14% of the posted price ($17.13 based on the March average of Dubai). Thus, to produce a barrel of Dubai crude, the total cost is just $29.87 to 43.70 a barrel.

Review body

The so-called Independent Oil Price Review Committee (IOPRC) set up by the DOE should be looking into these claims. This body is supposed to “study the alleged accumulation of excessive profits by oil companies resulting in grossly unfair pricing”.

It has been conducting “consultations” with people’s organizations to better carry out its mandate, so they say. But its last meeting with members of the Coalition Against Oil Price Increases (CAOPI) ended up as a debate for the most part. The IOPRC headed by staunch neoliberal economist Benjamin Diokno insisted on the parameters imposed on it by the ODL. Diokno, for instance, refused proposals to probe supply contracts and other documents that are key to the determination of excessive profits and overpricing.

Direct action

The lone point raised by CAOPI seemingly agreed to by the IOPRC in that meeting was the change in venue. If the review body is independent, it should use a neutral venue and not the premises of the DOE whose officials are often accused of speaking in behalf of the oil firms. Alas, even that very minor point apparently has not been heeded as consultations tomorrow (May 7) will still be held inside the DOE compound.

Then again, it would be wrong to pin our all our hopes on the IOPRC, whose members have displayed strong bias to the heartless market. Even as groups like CAOPI engage the IOPRC as well as Congress, the best prospects to end overpricing and the abuses of the oil firms and the ODL that perpetuate them still lie in the people’s direct political action. (end)

Standard
Consumer issues, Oil deregulation

Facts and figures you should know about oil prices

(The video above, produced by Mayday Multimedia, is a short but very useful visual presentation of the issues behind the high and increasing oil prices in the country. Below are some of the latest available official data as well as independent estimates that hopefully you may also find useful.)

  • P48.10 per liter – the common price of diesel in Metro Manila as of Mar. 8, 2012; P57.75 for gasoline; and P835 to P919 for an 11-kilogram (kg) cylinder tank of liquefied petroleum gas (LPG).
  • P3.20 per liter – the net increase in the pump price of diesel since the start of the year until the last round of oil price hikes on March 8-9; P5.85 for gasoline; and more than P190 per 11-kg cylinder tank of LPG.
  • 8 rounds of oil price hikes have already been implemented in the first 10 weeks of 2012.
  • P96 per day – the eroded amount from the income of jeepney drivers because of oil price hikes this year; P1,443 is their estimated daily consumption of diesel; P1,200 is the total amount loaded in a Pantawid Pasada card.
  • P62 million per day – the estimated increase in government revenues from the 12% value added tax (VAT) on diesel due to oil price hikes this year.
  • $116.16 per barrel – the published price of Dubai crude as of February 2012. Dubai crude is the benchmark for international crude oil prices that oil companies in the Philippines use in pricing their petroleum products.
  • $29 to $43 per barrel – the estimated amount needed to produce a barrel of crude oil. The estimate is based on the US Energy Information Administration’s (EIA) data showing that the finding cost (exploration and development) is about $6.99 to $18.31 a barrel while the lifting cost (operation and maintenance of wells) is about $5.75 to $8.26 a barrel. The EIA also said that royalties is about 14% of the selling price (or $16.26 a barrel based on Dubai crude’s selling price of $116.16 as of Feb. 2012).
  • $73 to $87 per barrel – the difference between the published price of Dubai crude and the estimated needed amount to produce a barrel of crude oil. This amount approximates the super profits squeezed through global monopoly pricing and speculation by oil monopoly capitalists and financial oligarchy (Goldman Sachs, Morgan Stanley, and other Wall Street firms) from the US, Europe, and other advanced capitalist countries.
  • Two-thirds – the estimated portion of physically sold oil in the world market that is traded through the production and distribution chain directly controlled by the oil monopoly capitalists such as Royal Dutch Shell (UK/Netherlands), ExxonMobil (US), British Petroleum (UK), Chevron (US), and Total (France). Such direct control allows the global oil monopoly to arbitrarily pad the price of oil as it goes through its production and distribution network.
  • At least 80% – the estimated portion of oil sold in the Philippine market that goes through the chain of production and distribution directly controlled by the global oil monopoly. As such, prices are not actually affected by the daily fluctuations in spot markets and futures market, as claimed by the big oil companies and government.
  • $378.15 billion – the total revenues in 2010 of Shell, the world’s largest oil monopoly capitalist. That’s almost twice the size of the domestic economy of the Philippines (gross domestic product or GDP of $199.59 B in 2010). Chevron, which like Shell is an oil monopoly capitalist operating in the country, posted revenues of $196.34 B, or almost the same size as our domestic economy.
  • P8.60 per liter – the estimated overpricing in the price of diesel in the Philippines since the Oil Deregulation Law was implemented (accumulated from January 1999 to February 2012). The amount is on top of global overpricing due to monopoly pricing and speculation and simply reflects the discrepancy in international crude prices and local pump prices.
  • P147 million every day – the estimated extra profits that oil firms earn from overpricing the local pump price of diesel alone. Almost 78% of this amount will go to the four biggest oil companies in the country (Petron – P55 M daily extra profits from overpriced diesel; Shell, P38 M; Chevron, P15 M; and Total, P8 M).
  • Almost P6 per liter – the estimated immediate reduction in the pump price of diesel if the VAT on oil is removed; almost P7 per liter for gasoline; and as much as P110 per 11-kg tank for LPG
  • 20 – the number of bills and resolutions filed so far at the 15th Congress that aim to review, amend, or repeal the Oil Deregulation Law; probe overpricing; reduce, suspend, or scrap the VAT on oil; institute a regime of effective state regulation or at least a price setting mechanism; and impose a cap on oil profits.
  • Zero – the number of bills and resolutions endorsed by President Aquino or substantially taken up and prioritized by the House and the Senate to reduce or control the price of oil. #
Standard