Token amounts

From the data of the Department of Energy (DOE), the 10 consecutive weeks of increases in pump prices have cumulatively pushed up fuel costs here in our country by P9.65 per liter for gasoline, P11.65 for diesel and P10.30 for kerosene as of March 1. These fuel price hikes have been going on every week long before Russia invaded Ukraine on Feb. 24. Ergo, the armed conflict between Russia and Ukraine entering its third week could not largely account for these hefty price increases by our oil industry players here.

Yes, we know Russia is a major producer of crude oil. But the major source of our country’s imported crude oil requirements come from the Organization of the Petroleum Exporting Countries (OPEC). Thus, our country is not directly facing any supply shortage of imported crude oil and refined petroleum products, Energy Secretary Alfonso Cusi reassured the public during our Kapihan sa Manila Bay virtual news forum last March 2. Cusi admitted though that our country’s oil price crisis has been largely demand-driven.

As of last week, the pump price of diesel stood at P63.01per liter while gasoline was at P71.08 per liter. That was after the Brent oil – the benchmark of the world price of crude oil – rose to $120 per barrel level before settling at $114 as the war between Russia and Ukraine intensified that week. Cusi warned that the prices of gasoline and diesel in our country may even breach P100 per liter. That is, if the price of crude oil in the world market would further go up should the Ukraine-Russia “war” drag on while gas-guzzling activities in the Philippines would continue uncontrolled.

The “big 3,” namely, Petron, Shell and Chevron – and the rest of the local oil industry players are poised again to jack up some more their pump prices effective tomorrow (Tuesday). The “fearless” forecast over the weekend by Unioil, diesel price will shoot up by a whopping P12.20 to P12.30 per liter while gasoline price will go up by P6.80 to P7 per liter.

While insisting they do not operate like a typical “cartel,” sellers of refined oil products in the Philippines have self-fulfilling prophecies in their price setting.

The Oil Deregulation Law of 1998 was supposed to make the industry competitive, especially to make their gasoline and other refined oil products more saleable than the others, especially in terms of lower prices. But where is competition when all the players impose the same price? Be it rollback or price hike, the “big 3” and the rest of supposedly independent and small players sell their refined oil products by the same amount.

Last March 3, Malacañang announced that the outgoing administration of President Rodrigo Duterte called for a “review” of the Oil Deregulation Law as a medium-term solution to the country’s oil price crisis.

The three major oil companies, or the “big 3” hold 38.96% market share of the total demand here in our country. As of the first half of 2021 data of the DOE, the following were listed as industry players operating in the Philippines: Phoenix; Unioil; Seaoil; Insular; Liquigaz; South Pacific; TPC; Jetti; Pryce Gas; SL Harbor; Isla LPG; Marubeni; FLC; PTT; Microdragon; TWA; Petrotrade; Warbucks Industries; High Glory; Era 1; Jadelink; Golden Share; Eastern; Warbucks Southern Corp.; Lubwell; and Powerfill. These other players as well as the end-users that import directly for their own requirement have the 61.04% of the total market share in the Philippines.

But it was a pleasant surprise when Petro Gazz, one of the independent oil industry players, suddenly announced and implemented price cuts a day after the latest price hikes last week. Petro Gazz stations nationwide reduced diesel price by P5.85 per liter while their gasoline price was cut by P3.60 per liter effective last Thursday until 11:59 p.m. Sunday night. Notably, these were the same amounts of price hikes uniformly imposed by all the oil industry players.

“(This is) to minimize the impact (of rising fuel prices) to motorists since we expected another round of oil price hike next week,” Petro Gazz cited in their announcement of price cutback. The good samaritan initiative of Petro Gazz was good enough for a four-day reprieve for its fuel customers. Unfortunately, no other oil industry player followed suit.

If Petro Gazz can do it, why can’t the “Big 3” and the rest of medium-sized and small players follow suit? This is getting curiouser and curiouser as in “Alice in Wonderland” exclaimed.

While the Duterte economic managers supposedly recommended for the “review” of the Oil Deregulation Law as a medium-term solution, they have ironically resisted calls to amend the Tax Reform for Acceleration and Inclusion (TRAIN) Law. In the thick of the election campaign period, several Senators and Congressmen have been calling upon President Duterte to convene them in a special session to pass the proposed TRAIN Law amendatory bill as the short-term solution that can bring immediate relief to the public transport sector, fisher folks, farmers and Filipino consumers in general against the impact of the oil price crisis.

Specifically, the lawmakers were pointing to amend Section 43 of the TRAIN Law that would extend the suspension of the excise tax on gasoline and other refined petroleum products. This prescriptive period under the TRAIN Law already lapsed in 2020.

For now, the Duterte economic team doubled the amount of government subsidies to the affected sectors in the public transport, fisher folks and farmers more than the allocations provided for in the 2022 national budget. Its combined total would amount to around P6 billion to be distributed over the next two months only.

Albay Rep. Joey Salceda, principal author and sponsor of the TRAIN Law, sneezed at the offered amount of subsidies. Salceda, chairman of the House ways and means committee, estimated the government collections from value-added tax and excise taxes from oil products due to the successive weeks of price hikes could reach up to P150 billion this year.

At best, the subsidies were obviously just token amounts.