Tuesday, July 22, 2008 Cabaero: Presidential factor By Nini B. Cabaero Beyond 30
WHAT goes behind oil pricing?
A lot of technical stuff largely attributed to global prices for crude oil, if you believe officials of oil companies.
With crude oil in the US$130 to US$140 a barrel level in the international market, companies like Shell, Chevron and Petron in the Philippines have to adjust pump prices to reflect the highest costs. This was how oil companies have been explaining their weekly price adjustments.
Really, what factors are considered when setting fuel prices? Aside from the technical stuff and global prices, also factored in is a phone call from the country’s leader.
Shell Philippines and Petron Corp. last weekend agreed to roll back diesel prices by P1.50 per liter in answer to a request by President Arroyo as relayed to them by Executive Secretary Eduardo Ermita.
Reports said Ermita, on the President’s orders, called up Shell country chairman Edgar Chua and Pet-ron chairman Nick Alcantara and got from them the promise of a price rollback just 48 hours after the increases took effect.
Presidential underlings were quick to point out that the rollback was a victory for oil consumers as it would go a long way to easing some of the burden.
Press Secretary Jesus Dureza went to the extent of saying that the rollback was because of the “very pro-active work by the President.”
Oil officials never said a presidential phone call was a factor to be considered in the pricing of their fuel products. But events that led to the rollback last weekend showed that a presidential request carries much weight in the oil business.
This brings us to questions on what else are considered when oil companies peg their pump prices or when they resort to weekly rate increases.
And since presidential intervention is a factor in fuel pricing, how much more price rollback could Arroyo demand and the public enjoy? A price rollback of P5 per liter? P10? P20? And, why only last weekend? Why did she have to wait for the weekly price adjustments to burden the public before ordering Ermita to give oil companies a phone call?
The rollback weakened the oil companies’ contention of under-recoveries or losses incurred if they did not adjust prices.
Cebu Rep. Eduardo Gullas said in a press release that Pilipinas Shell Petroleum Corp. and Petron Corp. have enjoyed nearly P70 billion in combined net profits since the Downstream Oil Industry Deregulation Law took effect in 1998.
He said Shell posted P33.59 billion in cumulative net profits from 1998 to the first quarter 2008, and Petron had P35.18 billion in profits over the same period. Regulatory filings of the two oil firms were the sources of these figures, he said.
The price rollback granted on President Arroyo’s say-so opens up her government and the oil companies to more questions about how pump prices are computed, what factors are considered and what more the government could do to help consumers.
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