In this new normal, oil retail prices are so abnormal

In the midst of the current malady we are in, we, who still breathe, have learned to find ways to keep our heads above water. Along the way, we’ve changed our ways of doing things. Yes, at the start, it was not just uncomfortable, it was outrageously terrible. Yet, in four months of being held hostage by this pandemic, we’ve learned to embrace the changes. We now call it the “new normal.”

Despite all inconveniences and the risks that we have all faced, we are able to develop good habits that are all worth passing on to future generations. For one, we are now health conscious. We only take healthy foods. Moreover, we flex our muscles every day and take a few laps on our treadmill. We’ve strictly maintained hygienic conditions in our households. More importantly, we have now realized the significance of work-life balance.

Due to these new-normal-influenced preferences, businesses have also learned to adjust.  While for the digital marketing and online-platform outfits, it is business as usual, to the rest, it was business unusual. Gladly, they’ve learned to embrace too the ways the digital-influenced businesses do their craft. Sadly, some businesses are just too unfortunate that, in theirs, customers’ physical presence is paramount. Tourism is one of those.

Yes, it is so true that some businesses have changed their approaches. Some did change with the welfare of their customers in mind. Unfortunately, however, some are simply taking advantage of our haplessness. As we struggle to fend for ourselves amid this contagion, these businesses took the opportunity cashing in without us realizing it, well, unethically. These are the oil retailers.

If you are keen enough, you will certainly notice that the retail prices today are more or less similar to the prices in the months of January, 2020 to February, 2020 (when the COVID-19 effects were not felt yet). The question is, are today’s retail prices appropriate? 

Now, let us put this in proper perspective. It is no secret that our country imports at least 90% of our domestic oil consumption. Therefore, global prices will have huge influence locally. Since global oil trade is denominated in US$, our peso’s performance against it is a huge influence too. 

Considering these two determinants, let’s take a deeper look at the current global oil price situation. On the first trading day of the year 2020, Brent crude was at US$66.00 per barrel. In February, it opened at US$54.45. Then, from March to May, the average price was in the vicinity of US$30.00 per barrel.  At the onset of June, 2020, it was at US$38.32 per barrel. On July 9, 2020, it was at US$42.04 per barrel. 

Therefore, globally, as clear as daylight the pre-COVID-19 prices are way up compared to the succeeding months. Then, why are local retail prices in January and February more or less the same as now?

Someone may argue that these are imported. Therefore, foreign exchange rates matter.  Yes, absolutely, it does. However, digging deeper into it will only reinforce the fact that prices must go down. 

As gathered from the Bangko Sentral ng Pilipinas, the average exchange rate in January was P50.839 to US$1.00. In the month of June, it was P50.097 to a dollar. So far, this month, it is P49.609. Obviously, as months went on, the peso was stronger, therefore, local prices should have been favorable. That’s a no-brainer.

Historically, however, driven by greed, these oil retailers refused to be fair and have always cashed in or took advantage in all situations. As we all know, every time global oil prices go up, automatically, oil retailers raise their prices not later than tomorrow. As if they just purchased their inventories today. Knowing fully well that our supplies are all imported, it shall take, at least, two weeks to arrive. Therefore, raising it right away has no basis at all. When prices go down, these same retailers do not reduce prices automatically. Well, logically, because what they have in their tanks were purchased when prices were still high. Simply put, they come straight when prices go down but are cheats when prices go up. 

Today, they have become greedier. As shown, global prices from March to July have always been lower than the months of January and February and the peso-dollar exchange rates have been favoring importation. Yet, local retail prices today are almost the same as those in January and February.   

Apparently, in this “new normal”, these prices are just so abnormal.