Recto got it all wrong, 2 big oil firms say

MANILA, Philippines—The country’s two biggest oil firms Wednesday disputed the National Economic Development Authority’s claim that local gasoline is overpriced by P8 per liter.

In separate statements, Petron Corp. and Pilipinas Shell said NEDA Director General Ralph Recto arrived at his calculations by quoting historical data from February 2005 and comparing these with current prices.

The two companies noted that in February 2005, the 12-percent value-added tax had not yet been imposed on petroleum products.

“To simply interpolate local oil pricing based on international crude or product prices would be tantamount to discounting various other important factors that affect pricing, such as the changes in the company’s cost structures, imposition of taxes (e.g., the 12-percent VAT in 2006), changes in product quality, introduction of biofuels, adjustments in working capital, implementation of industry standards in retail stations, double hull ships, among others,” said Roberto Kanapi, Shell vice president for communications.

Crude basis

Kanapi explained that Shell’s “local oil pricing mechanism is driven by the fundamentals of imported finished product costs and foreign exchange.”

He said Recto’s pricing calculations were based solely on the cost of Dubai crude oil.

“Despite the presence of our oil refinery in Tabangao, Batangas, we must be able to sell our products competitively against the alternative mode, which is through product importation. Thus, our current oil pricing mechanism is based on the deemed import parity of finished oil products using the Mean of Platts Singapore (MOPS) as a price marker,” Kanapi said.

Petron said the company has “always tried to mitigate the impact of high international oil prices on local pump prices.”

“Our restraint is nowhere more evident than in our return on sales, which remained at less than 3 percent for most of the years since 2000. This dropped to a negative 1.5 percent last year when we had an unprecedented net loss of P3.9 billion due to unrecovered crude costs,” it said.

Any overpricing should have resulted in a marked improvement in its return on sales, the company said.

Petron also pointed out that with the level of competition among fuel retailers now, it would be impossible to overprice by even a few pesos.

Weekly basis

Since the start of the year, Shell and Petron said they have been adjusting gasoline, diesel and kerosene prices on a weekly basis to ensure greater pricing transparency and to reflect more closely the cost of oil in the world market.

The two companies offered to sit down and discuss with Recto and the energy department the basis of their oil pricing.

Meanwhile, the Social Justice Society group that accused the country’s biggest oil firms of using pricing schemes that are grossly disadvantageous to the public has asked a Manila court to include their representative in the team that would examine the books of Pilipinas Shell, Chevron (formerly Caltex) and Petron.

SJS filed a case against Petron, Shell and Chevron in 2003. The case was reopened last February after an interagency task force on oil deregulation submitted a report that said there was no monopoly, cartelization and predatory pricing in the petroleum industry.

Judge Silvino Pampilo Jr. earlier ordered the examination of cash receipts, cash disbursement books, purchase orders on petroleum products, delivery receipts, sales invoices and other related documents on the purchases of petroleum products of the three firms from January 2003 to December 2003.

He said the panel of examiners would be composed of representatives from the Commission on Audit, Bureau of Internal Revenue and Bureau of Customs.

In a motion filed with the court, the SJS said it would form a third-party team to be composed of civic-minded certified public accountants for the task. –Amy R. Remo, Philippine Daily Inquirer, with a report from Tina G. Santos