Gas prices cut by P1 per liter

MANILA, Philippines – Oil companies rolled back their pump prices by P1 per liter yesterday in step with last week’s lower crude costs in the world market.

The price cuts of Pilipinas Shell Petroleum Corp., Petron Corp., Chevron and Seaoil were implemented yesterday while Total Philippines’ takes effect today.

“This is to reflect lower international product prices and foreign exchange during the previous week (computed on a moving average weekly basis),” Shell said in a media advisory.

Roberto Kanapi, Shell vice president for communications, said adjusting prices on a weekly basis is intended “to reflect greater pricing transparency.”

Shell also pointed out that it’s chiefly market competition that determines the direction of prices.

“Since the oil industry is deregulated, however, the ultimate determinant of oil pricing is market competition,” the Shell statement said.

The Department of Energy has ordered another audit on the books of oil companies in the wake of allegations of overpricing raised by some quarters, including Socioeconomic Planning Secretary Ralph Recto.

Two independent auditors have already examined the financial records of Petron for 2002 to 2007 and found no indication of overpricing.

Petron also said the Bureau of Internal Revenue and the Bureau of Customs regularly examine its books for tax purposes “so these are open to government.”

“As a publicly listed company, our records can be easily accessed by anyone,” Petron said in a text message to The STAR.

In a report completed in May 2008, the University of Asia and the Pacific (UA&P) concluded that there was no manipulation in the pricing of Petron and Shell.

“The price data suggests that local pump prices have not gone up as fast as the price of crude abroad or the MOPS (Mean of Platts Singapore, a gauge used by oil importers) prices for diesel and unleaded gasoline,” the study stated.

“Philippine pump prices simply tracked MOPS prices. A comparison of the share of the oil company take in 2007 with that in 1998 shows that the same trend of a declining share of the pump price that goes to the oil company,” the report said.

It added that it would be hard for Petron to overprice without getting caught because it’s a publicly-listed company.

“If oil companies have been overpricing, it should show up in higher profit rates. However, the adjusted return-on-equity figures for Petron and Shell do not appear extraordinary,” it said.

“From another perspective, that of the stock market, if an oil company like Petron had been performing well, one would expect its stock price to have appreciated significantly too. If Petron had been significantly more profitable than other companies listed on the exchange, it should have outperformed the stock market index,” the report pointed out.

“For these reasons, the oil prices do not seem to have been unreasonably high.” But while the UA&P, in its report, ruled out overpricing, it proposed some measures to limit fuel price hikes.

It said the government should not subsidize oil prices and that it should lead in crafting a policy response to changes in fuel prices.

“Countries that have been subsidizing oil companies have felt the strain it puts on government tax coffers. Subsidizing oil prices also blunts the incentive to conserve and be more efficient in the use of oil,” it said.

It also suggested the listing of oil companies in the stock market. “Listing on the stock market democratizes the ownership of a firm and brings a measure of added transparency,” it said.

“A broader ownership base of the company also means that if a listed oil firm were to actually make exorbitant profits, then the benefits would be shared with the stockholders through dividends or stock price appreciation,” the report said.

UA&P also underscores the need for a competition policy as well as an enforcement agency similar to the Department of Justice and Federal Trade Commission of the US, the Australian Competition and Consumer Commission, and the Japan Fair Trade Commission.–Donnabelle Gatdula, Philippine Star