Oil firms to start automatic price adjustments

Major oil players are expected to soon start “automatic” oil price adjustments that aim to make pricing of pump products more transparent.

It was not clear, however, if oil firms would still inform the media of weekly adjustments based on Mean of Platts of Singapore (MOPS).

Pilipinas Shell Petroleum Corp. country chairman Edgar Chua earlier said they would start the pricing scheme this January.

Petron public affairs manager Virginia Ruivivar, on the other hand, said they would probably adopt the same pricing mechanism.

Energy Secretary Angelo Reyes, meanwhile, expressed apprehensions on the planned weekly adjustments.

“It may create kinks in distribution because consumers will anticipate the price adjustments, thus wait for the day that the oil firms will move their prices,” he said.

“So to smoothen that out, people are already talking about more frequent adjustments. But when you have more frequent adjustments it will not be big adjustments but small adjustments,” he noted.

Reyes said they also have to address problems the scheme might create on the transport sector, particularly its cash flow.

“You have problems in the cash flow of the transport sector. That’s the downside of it,” he added. Reyes has been hinting that there would be more price reductions this month amid the continuing drop in crude prices in the international market.

“We think we should expect some more (rollbacks) because as I have said, the prices of Dubai crude reached an average of $40 per barrel and that is what we’re looking at for the pricing in January.

“We’re talking about the whole month of January… so we should see some more movements downwards… reasonable ones,” he said.

As of Dec. 20, the price of gasoline in Metro Manila ranges from P30.97 to P37.10 per liter while diesel goes from P29 to P33.48 per liter.

Reyes said based on their preliminary estimates, they see oil prices in 2009 to hover from $40 to $60 per barrel.

But Reyes pointed out that oil prices are volatile and they could not project prices beyond one month.

“I don’t think we can reasonably expect people to project beyond one month because we are using the previous month’s average and the volatility of the situation in the Middle East,” he explained.

He warned consumers to be prepared for any price movements, whether up or down.

“It’s difficult to say that no event in the Middle East will influence prices. If you have a major outbreak of hostilities there that goes out of control, it’s anybody’s guess,” he said. –Donnabelle Gatdula, Philippine Star