GASOLINE is overpriced by as much as P8 a liter, Economic Planing Secretary Ralph Recto said yesterday.
Citing a simulation run by the National Economic and Development Authority, Recto said unleaded gasoline should cost about P32 a liter, but gas stations were selling it for P38 to P40.
Recto’s statement came as Pilipinas Shell raised gasoline prices by 50 centavos a liter to reflect higher world prices, using the Mean of Platts Singapore benchmark.
The oil companies last week increased gas and diesel prices by P1 and 75 centavos, respectively.
Data from the Energy Department showed that the average retail prices of unleaded gasoline had risen from P34 a liter in January to P38 a liter in April, and despite the stable crude prices in the world market.
But Recto said diesel prices were correctly priced at P27 to P28 a liter.
A working paper at the Asian Development Bank noted that while global oil prices had subsided relative to the peak reached in mid-2008, they remained elevated and volatile as economic uncertainties continued.
“The likelihood of these prices rising again soon cannot be ruled out. High oil prices can adversely affect growth, employment, external accounts, and fiscal positions of governments,” said the authors of the paper, Shikha Jha, Pilipinas Quising, and Shiela Camingue.
They warned that an overwhelming response across Asia as international oil prices spiked in 2008 was to shield domestic consumers through oil subsidies, which were inequitable, economically inefficient, and environment unfriendly.
“These subsidies add directly to the fiscal deficit and public debt, but are generally hidden, making their measurement difficult,” they said.
“Additionally, in combination with lower growth rates, higher spending to rev up demand across Asia is also worsening the fiscal positions of governments.”
The authors said that while the Philippines, along with India, Maldives, and Nepal did not directly subsidize diesel, there were indirect price interventions in these economies.
For example, the Philippines was providing P1 to P2 per liter in diesel subsidy for public utility vehicles.
The report said uncertain market conditions, speculative demand, and political risk factors could put pressure on oil prices to fluctuate widely.
If growth rates in major industrial economies started to rebound in 2010, these prices might go up again, they said. –Roderick T. dela Cruz with Alena Mae S. Flores, Manila Standard Today