Tuesday, October 07, 2008 No oil price hike this week, say firms
WITH the prices of oil in the world market continue to plunge, both major and independent oil players are not inclined to implement any price adjustments this week.
Fernando Martinez, president of Eastern Petroleum, said that while the government is planning to impose the P1 tariff on imported oil, “still we did not use it as a reason to increase oil prices.”
“We are surviving and doing fine, but nothing fantastic. The government does not even subsidize prices, but instead it is oil companies who provide discounts to public transport groups,” Martinez said during Monday’s stakeholders meeting called by the Department of Energy (DOE).
Martinez likewise noted that even as the prices in the world market continue to drop because of the current financial turmoil hitting the United States, there are other expenses that need to be factored in and not just the actual or landed cost of the imported oil.
“Under a deregulated regime, there is no formula in determining prices. And the law does not even provide a formula to follow. The problem is acceptance and as long as you cannot accept the fact, then we will be repeating the same old arguments. We have already ran out of explanations,” Martinez declared
He said landed cost for diesel was at P44.50 per liter and they are selling diesel at P45.50 per liter for wholesale which gives them P1.50 in terms of margin to cover the cost to finance their overhead, loans, and personnel.
Like Martinez, Ramon Villavicencio of Flying V, another independent oil player, said they were just able to sustain their operations.
“For us, we base our pricing in the MOPS,” he said.
Oil giants such as Petron Corporation, Pilipinas Shell, and Chevron Philippines said they were able to recover because of the continued drop in the prices of fuel in the international market.
Edgar Chua, Shell country manager, said “even if there are companies to recoup under-recoveries, it does not happen because of market competition.”
He added that under-recoveries do not fall under the pricing issue since each company has different situations.
At the same time, Chua said they even posted a 20 percent drop in their sales owing to rampant oil smuggling.
"There are two reasons why there are places where oil prices are sold at a huge discount such as the prevalence of smuggled products. An oil company, then, would have to choose whether to match their pricing and sell at a loss, or not match and sell products at a higher price and not be able to sell its products,” he said.
Jose Campos of Petron echoed Chua’s claim saying that comparing the prices this year to last year, there is not much difference.
”The price before are artificially low, if you want a good comparison you can go back to last year, when the prices are still relatively stable,” he said.
He noted that in March last year, Dubai crude was about US$58.80 per barrel and diesel was sold at P31.80 per liter.
MOPS-based diesel average around US$96, and diesel was at P31.80 then and now it's around P49 per liter.
“If you go back you’ll see that the prices have not increased that much, in fact the increase in crude is actually bigger in percent-wise. The relatively lower retail price this year is due to the fact that the prices are artificially low. Our understanding then was that we would increase by P1 per liter to P1.50 per liter, but then oil benchmarks have been increasing at a faster pace then,” he further explained.
For his part, Mark Quebral of Chevron said from February to August, Chevron “has been selling at a loss.”
However, because of the improvements during the middle of August to present, Quebral: “We were able to recover our losses. So we don't deal.”
He also admitted that their sales peak during the months of April, May and June.
Price monitoring conducted by the Department of Energy, on the other hand, indicated that the prices of Dubai crude as of October 3, 2008 dropped to US$89 per barrel from US$95 per barrel in September. MOPS for unleaded gasoline went down to US$101 per barrel from US$107 per barrel last month and MOPS for diesel decreased to US$112 per barrel from US$121 per barrel during the September average.
At present, local pump prices of gasoline ranged between P47 to P50 per liter and diesel at P46 to P49 per liter.
Before the month of September ends, oil companies rolled back the prices of their gasoline and diesel by P1 per liter. (MSN/Sunnex)
