Calamity or not, recent oil-price hikes unjustified — Ibon

MANILA — The recent increase in oil prices while the country is recovering from recent disasters again calls atttention to the urgent need for much greater transparency in the oil industry. But according to research group IBON, with or without the state of calamity, the oil price increases are unjustified.

Local pump price adjustments have far outpaced changes in global oil prices, and this confirms public perception that pump prices go up too much when global oil prices rise, and too little when global oil prices fall. Since full industry deregulation in January 1999 to August 2009, the price in pesos per liter of Dubai crude has increased by an average of P0.15 per month, yet the price of diesel has increased on average by P0.18 per month and of gasoline by an even much higher P0.21 per month (diesel and gasoline prices are net of RVAT). This is despite improvements in oil production, refining, hauling, and communications.

Prices between firms are close to each other, manifesting absence of real competition, and consumers are denied any meaningful differences in price. In early October, for instance, the average retail pump prices of diesel and unleaded gasoline of the respective industry players were largely within P0.50 to P1.00 of each other. The “Big 3” firms in particular appear to be asserting their leadership and setting relatively high pump prices with the other players setting more or less near the prices that the dominant sellers have posted.

Much greater oil industry transparency is needed if the oil firms want to dispel doubt that they are making superprofits at the expense of the public. Indeed if anything the apparent failure of oil deregulation affirms the need for a socially responsible oil industry.