Deregulation, competition tagged in oil prices disparity

TAGBILARAN CITY, Bohol, Philippines (PNA) — Deregulation and stiff competition determine the prices of petroleum products, including their disparities.

This conclusion was subscribed to by at least two oil distributors who responded to a query on the matter by Department of Energy (DoE)-7 Regional Director Antonio Labios.

Labios relayed his views on the matter, specifically on a concern raised by Bohol Governor Edgar Chatto who is asking why prices of petroleum products in Bohol’s capital city, Tagbilaran, are higher than in Ubay and other towns.

In a letter to Labios, Mark Quebral, Manager for Policy, Government and Public Affairs Policy for Chevron, Philippines (the company behind the Caltex fuel brand) explained that stiff competition among oil dealers in Ubay brought down the prices of petroleum products in the town since 2009. “There has been active price competition going on among the retailers in that town since last year,” he said.

Quebral said Chevron tapped its Branded Marketer in Bohol to conduct a price survey to validate the price situation and dynamics in the province.

The survey results, which he attached to his letter to Labios, showed lower product prices in Tagbilaran City than in all other towns of Bohol, except Ubay.

Quebral also explained that aside from the cost of the business, competition also serves as the other significant factor in setting the price of petroleum products in the local market.

“Being in a deregulated oil regime, not only cost but competition plays a significant role in price determination within a local market,” he said.

In a separate statement, Roberto Kanapi, Vice-President for Communications of Pilipinas Shell Petroleum Corporation, conveyed the same theory in response to an inquiry regarding reported higher prices of gasoline in Tagbilaran City compared to the nearby towns of Loon, Talibon and Ubay as well.

“As you know, oil pricing is driven primarily by fundamentals of product costs and foreign exchange. Given that the oil industry is deregulated, however, market competition is the ultimate determinant of oil pricing, with prices varying across geographical locations as dictated by competition,” Kanapi told Labios.

He added that Shell dealers in the towns of Ubay, Loon and Talibon have been into stiff competition with other industry players for in the past years, and that lowering fuel prices has been proven effective in taking the sales lead.

“In the above area cited, our dealers experienced aggressive pricing competition by some industry players, which sell particular products at significantly lower prices. Thus, our dealers adjust prices accordingly in order to remain competitive and ensure that our customers are provided with competitively priced product,” Kanapi said.

A survey commissioned by Chevron showed that Shell in Poblacion, Dimiao sells regular gasoline with the highest price of P49.75 per liter, followed by Petron in Poblacion, Inabanga and Caltex in Poblacion Norte, Batuan which sell the product at P49.50 per liter, Fuel prices of Tagbilaran oil retailers range from P47.80 to P48.80.