DOE orders oil firms to break down prices

MANILA, Philippines — Energy Secretary Alfonso Cusi is requiring all oil companies to report a breakdown of oil prices, including profit margins despite strong opposition from industry players.

“Consistent with the mandate of the Department of Energy on effective data-driven policymaking, as well as ensuring greater market transparency, we have amended our guidelines for the reporting of price adjustments by oil companies in the downstream oil industry in the Philippines,” Cusi said in a statement yesterday.

Under the existing guidelines, oil companies are required to report to the DOE any adjustments in the retail prices of gasoline, automotive and industrial diesel, kerosene, jet fuel and aviation gas, and household and automotive liquefied petroleum gas (LPG).

With the revised guidelines, oil players will be required to report their “unbundled price adjustments” to include import costs, tax burdens, biofuel costs and other essential cost components that contribute to the changes in retail prices.

“These enhancements will provide the DOE and other relevant government agencies with the necessary data to formulate proactive and appropriate policy initiatives for the benefit of consumers and the downstream oil industry,” Cusi said.

Oil companies should indicate the detailed computation, explanation and supporting documents on the cause or reason of each unbundled price adjustment.

The companies should follow a format, dividing unbundled prices into four items, namely international content, taxes and duties, biofuel cost, and oil company take components.

The international content includes import cost, freight cost, insurance and foreign exchange rate. Duties, excise tax, value added tax and other imposts should be detailed under taxes and duties.

The oil company take components, which garnered strong opposition from oil players, include port charges, refining cost, storage cost, handling cost, marketing cost, transshipment cost, other costs, and company profit margin.

Oil players have opposed the DOE’s plans to include the breakdown of unbundled oil prices.

In particular, Pilipinas Shell Petroleum Corp. (PSPC) president and chief executive officer Cesar Romero urged the government to review the circular, as this could have some legal implications with the Downstream Oil Industry Deregulation Act.

“This has to be carefully studied because there are some legal implications associated with deregulation if and when the circular comes up. It has to be ensured that it is legally compliant with the deregulated nature of the industry,” Romero said.

Meanwhile, Petron Corp. president and chief executive officer Ramon Ang said oil prices are dictated by market forces.

However, Cusi said the data provided would support the DOE-Department of Justice (DOJ) Task Force investigations on reported incidents of anti-competitive behavior.

“Rest assured that the utilization of the data collected will be subjected to the strict confidentiality requirements under the Downstream Oil Industry Deregulation Act, the Freedom of Information Act, and the Philippine Competition Commission laws,” he said.

 Apart from unbundled oil prices, oil companies would be required to provide a weekly notice of the price adjustments (decrease, increase or no adjustment).

The DOE policy would also require the oil companies/bulk suppliers and retail outlets to submit baseline data every end of the year for the unbundling of their base price and to comply as well with the mandatory price display board.

The new policy is pursuant to its mandate under Republic Act No. 8479, or the Downstream Oil Industry Deregulation Act of 1998, to monitor both international and domestic price movements of petroleum products.