‘Unbundle’ oil receipts

If there is one common ground where the government and the militant left-leaning groups see eye-to-eye, it is on the subject of transparency of domestic pricing for gasoline and other refined oil products. Such common ground on the principle of transparency gets a big push following the latest big time oil price hikes imposed starting Monday midnight by big and small oil players here in the Philippines.

In particular, the Makabayan bloc at the 18th Congress led by Bayan Muna party list representative Carlos Zarate renewed their call to the government to compel the players of our country’s downstream oil industry to “unbundle,” or break down in the official receipts the items being charged to motorists/consumers. Zarate reiterated this call during the budget deliberation of the Department of Energy (DOE) at the House Appropriations Committee just a month ago.

“In relation to the unbundling of costs of oil products, we have been pushing for that for the longest time and there’s already a circular from the Department,” Zarate cited. A senior minority deputy leader at the 18th Congress, Zarate noted that oil companies have been trying to block this DOE initiative by filing left and right court cases to restrain the government implementation of this safeguard measure.

The Makabayan lawmaker specifically referred to Department Circular (DC) 2019-05-0008 that ordered the “Fuel Cost Unbundling” or the itemization of Fuel Price Components. The DOE Circular requires oil firms to submit reports on its segregated price components, including details on profit margin. The “unbundling” is a mechanism that enable the government to check whether or not the oil firms have been overcharging consumers.

Zarate welcomed the DOE Circular following its issuance last May, especially after the government implemented the second tranche of excise taxes on gasoline and other fuel products as mandated by the Tax Reform for Acceleration and Inclusion (TRAIN) law, the first tranche of which took effect in January last year.

But Mandaluyong City Regional Trial Court Branch 213 Judge Carlos Valenzuela issued a temporary restraining order (TRO) on Aug. 5. This was acting on the petition filed in June by Petron Corp. for a writ of preliminary injunction to prevent the DOE from compelling oil companies to detail how price adjustments are computed. The Philippine Institute of Petroleum Inc. (PIP) also filed a separate TRO petition against the implementation of the same DOE circular.

The oil firms argued that such “unbundling” requirement by the DOE is not consistent with the deregulated market as allowed by existing Philippine laws. The Solicitor General’s appeal to withdraw the TRO remains pending.

This week’s P2.10 to P2.30 per liter increase in the price of gasoline and P1.60 to P1.80 for diesel were the latest shockers to consumers. It came just a week after an almost the same amount of increases took effect purportedly due to the domestic market reaction to the resolution of the United States-China “trade war.”

This week’s oil price hikes supposedly reflected the impact to domestic oil industry from the supply disruption caused by the recent attacks that destroyed two oil fields of Aramco in Saudi Arabia.

Based on official figures collated by DOE from January to date, there have been a total of P7.86 per liter “net” increase in the price of gasoline while diesel had a “net” increase of P5.82 per liter. So while there were price rollbacks in between, the oil price hikes far outweighed these reductions that came in trickles of centavos per liter.

But we consumers have no way to know nor determine if these reasons that jacked up prices are indeed justifiable grounds for such upward adjustments. Thus, the DOE’s “unbundling” would show us at least the source or factors that necessitated any price movements.

The DOE headed by Secretary Alfonso Cusi was thankfully frank and upfront to warn the public to brace for big time price hikes that will definitely be the immediate effect of this latest tension in the Middle East, the primary source of our country’s crude oil supply requirements.

Saudi Arabia produces 5.7 million barrels per day (bpd) of crude, or more than five percent of the global oil supply. Incidentally, the Kingdom observed its 89th founding anniversary last Monday unperturbed by the recent Houthi rebels attack the previous week.

During our weekly Kapihan sa Manila Bay breakfast forum at Café Adriatico, Malate last week, the DOE Secretary reassured us we have enough fuel inventory – crude and finished products good for 30 days; bulk importers for 15 days, and liquefied petroleum gas (LPG) for seven days – as required by existing laws in our country.

It is only Petron and Shell that have oil refineries but Caltex and the rest merely import finished products of gasoline, LPG and other refined petroleum products.

Cusi conceded that the country remains susceptible to the consequent price volatility of gasoline and other refined oil products in the next few weeks. The local oil companies, he admitted, are likely to impose hefty hikes anew in their pump prices. This includes the three major oil players in the country – Petron, Pilipinas Shell and Caltex – and at least ten independent petroleum producers like Phoenix, Total, Unioil etc.

As succinctly explained by the DOE chief, the country’s oil pricing is completely in the hands of the private sector.

The government no longer fixes the price of gasoline and other petroleum products as mandated by Republic Act 8479, or the Oil Industry Deregulation Law of 1998. Among other things, it abolished the Oil Price Stabilization Fund and paved the way for the government to privatize the Philippine National Oil Co. (PNOC) that was once fully owned by the government.

The “unbundling” of the costs of gasoline and other refined oil products in the official receipts should be a welcome safeguard mechanism that would remove persistent suspicion of “cartel-like” pricing. This promotes, in the end, a healthy competition that really dictates the pricing here of these oil products.