Tuesday, July 22, 2008 Editorials: Politics and oil pricing
THERE should be something wrong with a pricing system that results in prices of commodities—especially an important product like oil—bounce like a ball hitting ceiling.
Oil firms raised the price per liter of diesel by P3 last Saturday, and then at least Shell and Petron announced on Sunday a reduction of P1.50 per liter starting yesterday.
The reason used by the oil firms for the “urong-sulong” pricing (that Malacañang asked for it in a meeting), is comprehensible and consumers obviously welcomed it.
In a year when oil prices have been jacked up 22 times already, any price rollback, no matter how small or fleeting, should be pleasing to the ears of people, at least initially.
For the Arroyo administration, which has gotten a beating in a recent survey, the hope is surely that this would arrest, even momentarily, the plunge in its popularity rating.
Political pricing
The reduction though is artificial and while oil firms did give in to Malacañang’s request, Shell said they still have an under-recovery in the price of diesel of P4 per liter.
Thus we are into a situation where even if the price of oil in the world market has gone down, oil firms in the country will continue raising oil prices for a few weeks more.
This begs the question of whether or not government’s policy of interfering in the pricing of oil—call it political pricing—is advantageous for the country in the long term.
While the interference cushions the impact of steep oil price hikes in the world market, a cushioned price effects the same pain as an un-cushioned price in the long term.
And it so muddles the pricing setup it gives oil firms a chance to profit from it.
Manipulation
Checking the abuses of oil firms in the pricing of petroleum products has been difficult as it is, with even the simple task of finding out the quantity of old supplies that oil firms should sell using old prices stumping government monitors.
Now they will have to add there computations of the amount oil firms need to recover with the artificial depression of oil prices.
There’s no question that the rise in oil prices in the world market has given oil firms in the country a better chance of manipulating domestic oil prices.
Political pricing should not expand the chances further.
