Another oil price rollback: Last for the month?

MANILA, Philippines – Oil firms are likely to implement another oil price rollback this weekend but this may be the last for the month if there will be a reversal in the trend of international oil prices in the coming days, an industry official said.

During an industry stakeholders’ meeting with Energy Secretary Angelo Reyes yesterday, Petron Corp. spokesperson Virginia Ruivivar said “based on MOPS (Mean of Platts Singapore), there may still be room for a (downward) adjustment.” MOPS is the benchmark used by oil importers.

But Independent Philippine Petroleum Companies Association (IPPCA) chairman Fernando Martinez said as far as they are concerned they have already given consumers what is due them.

“We have already reflected the drop in international prices. We may have another rollback if prices will continue to go down for the remainder of the month. But we may carry out the next reduction (after this weekend’s rollback) in the latter part of September or first week of October,” he said.

Unioil Philippines earlier said they would reduce their prices this weekend by P1.50 if global prices continue to go down.

But the official said with a deregulated market, they cannot say when they will actually adjust their prices.

On the issue of transparency in pricing, Shell country chairman Edgar Chua said, “We just need to be careful with what information is being asked. Again, the DOJ will rule that it’s again price fixing, cartelization. What’s important for the transport groups is what the real price is.

“But when the industry comes out with public information on prices, it would seem that we are setting an industry price. So I think that’s what’s difficult since the industry is deregulated. Another question is whether price adjustments would be better done on a weekly or daily basis,” Chua said.

This was in response to a query on whether oil companies could come up with a daily update in newspapers on oil prices.

“If daily, whatever the price was yesterday is what will be reflected. The problem is people don’t seem to understand the basis with prices being moderated, and it is the industry that’s being blamed, especially when we tend to seem to increase faster and reduce prices at a slower pace,” Chua said.

In the same meeting, Chua also warned that these unending complaints against oil companies have been hindering the entry of new refiners in the country.

“Since the passage of the Oil Deregulation Law no one has put up refineries, only retail stations,” the Shell official said.

At present, only Shell and Petron Corp. refine crude oil in the country, with a combined capacity of about 50 percent of the country’s oil requirements for the transport sector and local industries.

Chevron (formerly Caltex) Philippines Inc. decided to close its refinery in 2003 and opted to become an oil importer.

Chua cited a 2005 study by an Independent Review Committee chaired by Carlos Alindada, retired chair of SGV & Co. and a former commissioner of the Energy Regulatory Commission, which noted that the industry only offers a four to six percent return or around four to six centavos for every peso poured in as investment.

This is much lower than the guaranteed rate of 12 percent before the Oil Deregulation Law was passed a decade ago.

For the first half of 2008, Petron said it posted only two percent return.

Martinez, who is also chairman of Eastern Petroleum Corp., said despite the fact that their profit margins are low – or only three centavos per P1 sale for small retailers – and the unending state-commissioned audits, local oil firms have been the subject of various groups’ ire.

According to Martinez, they could give what the transport groups want – a one-time rollback – if the government will remove the value-added tax (VAT).

“We can reduce the prices as much as P8 per liter for gasoline and P4 per liter on diesel if VAT is removed,” he said.

Since August this year, the oil firms have reduced the price of gasoline by P6.50 per liter and P5 for diesel.