Govt will needed to enforce oil price unbundling – IBON

Research group IBON
said that the Department of Energy (DOE) circular ordering oil companies to
unbundle prices is a welcome and overdue measure for greater transparency to help
prevent overpricing of oil products. However, the government must have the
political will to implement this and the involvement of the public and consumer
groups must be ensured, said IBON.

Last May 2019, DOE
Secretary Cusi signed Department Order Circular No. DC2019-05-0008 or the
“Revised Guidelines for the Monitoring of Prices in the Sale of Petroleum
Products by the Downstream Oil Industry in the Philippines”. The circular aims
to make oil price rollbacks or hikes more transparent as the detailed breakdown
of the changes is shown. The unbundling of oil prices is expected to take
effect in July. However, private oil companies filed a temporary restraining
order (TRO) against the DOE Circular, arguing that it is against fostering
market driven competition.

IBON said that
unbundling will allow consumers to see the reasons behind price movement such
as the international content, taxes and duties, biofuel cost, and oil company
take components. The government and the public will be in a better position to
assess price movements because the oil companies have to explain their price
adjustments including providing supporting documents.

But the group pointed
out the oil companies’ long history of overpricing especially after the Oil
Deregulation Law (ODL) of 1998 where government surrendered its power to
regulate oil prices.

IBON recalled
government’s claim that the ODL would result in fairer and more stable fuel
prices. Government also promised that the ODL would dismantle the local oil
cartel by allowing the entry of new players to challenge the domination of
Shell, Caltex and Petron, thus supposedly letting market forces determine real
oil prices. But deregulation only worsened oil industry monopoly pricing and
allowed oil companies to set prices opaquely with the consent of government
that gave up much of its regulatory powers, according to IBON.

Shell, Caltex, and
Petron still dominate the Philippine oil industry and they remain among the
most profitable firms in the country. In 2000, Shell Philippines had a net loss
of Php334 million that grew to a net income of Php43.7 billion in 2017. Caltex
Philippines had a net loss of Php3 billion in 2000 that changed to a net income
of Php6.4 billion in 2017. Petron Philippines had a net loss of Php1 billion in
2000 that became a net income of Php8.9 billion in 2017.

IBON said that the
government should insist on transparency through the DOE circular as an initial
step to rein in the oil firms’ monopoly overpricing and profiteering. But
beyond this, said the group, the government should also restore the regulatory
powers over the oil industry that it gave up under the ODL and steadily work
towards the strategic goal of a nationalized oil industry. ###

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