Friday, August 15, 2008 Measly fuel price rollback By Ricardo Y. Danlag Jr., CPA Vice Dean, Chair Accountancy Department, University of Southern Philippines Foundation
OIL prices in the world market plunged to $115 a barrel on Aug. 8, $32 lower from a high of $147.27 on July 11. Despite this 22-percent drop, domestic oil companies are not expected to reduce pump prices-at least, not right away.
Although oil companies implemented a P1-rollback last Aug. 8, the reduction is a measly sum compared to the recent increases in the price of fuel. Take, for instance, the price of unleaded gasoline. Last July 28, it was at a high of P61.31 per liter; with the rollback, it went down only four percent to P58.94.
There is a huge disparity between the drop in world oil prices and the rollback of pump prices. The price of crude oil in the world market went down 22 percent but domestic fuel prices were reduced only by about four percent. When will oil companies reduce pump prices to pre-July levels?
Shell Petroleum, in late July, said that although there has been a substantial drop in world oil prices- from $147 per barrel to an average of $122 to $123 per barrel for regional benchmark Dubai crude—this has been happening only in the past few days. The company acknowledges that people expect to see the reduction immediately at the pump.
If prices continue to soften in the next few weeks time, “that’s when we will expect a reflection of that in the market,” Shell said in a statement. But it is already three weeks and the world price continues to drop, and the only thing oil companies can brag about is a P1-reduction last Aug. 8. What are these oil companies waiting for? More profits? I’ve had enough of the so-called corporate social responsibility (CSR) of oil companies.
CSR could be best manifested in the tempering of the profit hunger.
No amount of school buildings, medical missions, scholarship grants and the like can erase the perceived profiteering committed by oil companies. Since January 2008, the oil firms have adjusted prices of diesel, the fuel used by jeepneys and buses, 22 times. As of the end of July, these price adjustments have totaled P24.
Oil companies have justified the non-reduction by pointing out under-recoveries in July, which—if you take the average—would show that it is in the same level as in June. While consumers bore the brunt of the high price, domestic oil companies registered huge profits.
Due to this unexplained disparity, consumer groups and Congress have criticized the sharp price increases in recent months. Congress calls for a public audit of the financial operations of oil companies, in view of the impact on the economy of rising fuel prices.
Congress finds it mysterious that the oil companies managed to announce nearly identical prices at almost the same time, although their cost structures are different. Legislators lambasted the oil companies for the allegedly whimsical and arbitrary manner in which oil prices are set in the country.
Congress urged the Commission on Audit (COA) to determine if the “big three” in the oil industry have earned excessive profits from the time crude oil prices went up beyond $70 per barrel in the world market. It said that COA should also determine why and how, in spite of significant variances in cost structure, the companies are still able to sell oil products at almost identical prices and raise prices at almost the same time.
It is within the COA’s authority to look into the books of private and semi-private companies if their business involved public interest as in the case of oil firms.
I hope oil companies would now see the light and moderate their greed by reducing oil prices back to the pre-$147 per barrel level. How I wished it will roll back to the P40-pump price level.
