Freebies spice up competition in PHL’s deregulated oil industry 

In Photo: Motorists fill up at a gas station in Manila.

In a bid to keep up with peers in the highly competitive downstream oil industry in the country, service stations nowadays are offering discounts, freebies and even a lifetime supply of fuel.

Pilipinas Shell Petroleum Corp., for instance, is implementing a P1 per liter discount for public utility vehicles (PUVs) dubbed as the “PUV Lane,” which used to be the DOE (Department of Energy) Lane since this was an initiative of the agency.

Shell’s PUV Lane is not a promo. The company brands it as a market discount. The recent promo offered by Shell was called the “Summer Promo” in which motorists can avail themselves of free drinks every time they gas up. On their fifth visit, they earn a chance to win a free vacation.

Shell said these are meant to increase awareness on Shell fuels. “We merely match what the competition is doing so we can defend our areas of responsibilities,” said a Shell official who asked not to be identified.

Of the nearly 1,000 Shell stations all over the country, 85 sites in Metro Manila extend the discounts to PUVs, 52 in North Luzon, 63 in South Luzon, 62 in the Visayas, and 38 sites in Mindanao, according to company data.

Some dealers of Petron Corp., the country’s largest oil refiner, also offer cheaper gas prices in selected gasoline stations.

The most popular is the P1-P2/liter discount on some of its petroleum products. A Petron dealer in Sucat, Parañaque City, said the signage of its price offering is large enough to attract the attention of motorists.

“The larger our sign, the better. As you can see, every gasoline station here offers a promo different from its rival. We must be effective at attracting motorists so they will choose Petron over the others,” said a dealer, who asked not to be named.

Protecting market share

Shell’s PUV Lane enables the country’s second-largest oil company “to defend our site volumes on the commercial driver segment, depending on where it is employed.”

JP Montoya, president of the Association of Pilipinas Shell Dealers Inc. (APSDI), said in an interview that the PUV Lane is not only meant to attract more customers, particularly jeepney drivers, but to protect Shell’s market share as well.

Based on 2016 DOE data, Shell ended 2016 with a market share of 20.3 percent.

“We match the prices of other gas stations to remain competitive. This PUV Lane is really meant to protect our market share against competitors. Sometimes it’s not about if we will earn from it. It’s about protecting your market share,” said Montoya, who noted that motorists, most often than not, proceed to gas stations that offer the lowest price, even if it’s just a few centavos cheaper.

At times, Montoya said, this translates to higher volume. “On profit, it’s relative to volume. Of course, if everyone is doing the same thing in a certain area, then you do the same thing, more or less, to protect your business. That’s how it goes,” he said.

In Marikina City, for instance, Montoya said jeepneys abound. “This is a good sign to implement the PUV Lane. We observed an increase in the number of PUVs that gas up in Shell. Such discount is effective relative to the site where you will implement it,” he pointed out.

Oil Deregulation Law is working

The Department of Energy (DOE), for its part, welcomed these developments. “This is what the Oil Deregulation Law is all about. It really encourages competition. We have many players now compared to when the industry was regulated,” said the agency’s Undersecretary Felix William Fuentebella in a text message.

Republic Act 8479, or the Oil Deregulation Law, was passed by the 10th Congress in 1998. The law mandates the state to liberalize and deregulate the downstream oil industry, with the aim of boosting the petroleum’s competitive market and promote the influx of more new players in the industry.

“Deregulation has helped promote healthy competition. Motorists are benefiting from it. We now have more players than before. As a result, motorists have a choice. They would gas up where they want to,” Fuentebella added.

Based on 2016 DOE data, the “Big Three” (Petron, Chevron Philippines and Shell) got a combined 57.8-percent market share, while the other industry players—including PTT Philippine Corp. (PTTPC), Total Phils., Seaoil Phil. Inc., TWA Inc., Phoenix, Liquigaz, Petronas, Prycegas, Micro Dragon, Unioil, Isla Gas, Jetti, Eastern Petroleum, JS Union, JS Phils. Corp., Petrotrade, South Pacific, Marubeni, SL Harbour, Perdido and Filoil Logistics Corp., as well as the end users who import directly most of their requirement—captured 42.2 percent of the market.

Meanwhile, the local refiners—Petron and Shell—captured 51 percent of the total market demand, while 49 percent was credited to direct importers.

Melita Obillo, DOE-Energy Oil Industry Management Bureau director, said there’s no need for oil firms to ask for the agency’s approval prior to offering discounts on selected petroleum products. “On promos, the oil companies can do that as long as they are not selling below cost. They don’t need approval from DOE,” Obillo said.

And for as long as their petroleum products meet the standards, and the volume dispensed is accurate, Obillo stressed that the agency will not get in their way.

“I think that’s part of their marketing strategy. Such promos are beneficial to the consumers provided that they comply with the standards,” said Obillo in a text message.

‘Giving back to our customers’

One oil firm has caught the ire of the public when it recently offered a P10/liter price on all its petroleum products, as the areas near its stations turned bad traffic into worse during the duration of the promo.

On its 10th listing anniversary on July 11, Phoenix Petroleum sold from 10 a.m. to 12 noon its fuel at selected stations nationwide for only P10/liter.

The listing marked many firsts: The first company from Davao City to list on the Philippine Stock Exchange; the first oil company to list after the passage of the Oil Deregulation Law in 2008, and the first independent oil company to go public.

From its initial five stations in 2005, Phoenix has grown its retail network to more than 515 stations nationwide, and expanded to serving commercial clients in power, manufacturing, aviation, transportation, marine, fishing, construction and other industries.

Long lines of vehicles waiting to be served at various Phoenix service stations irked motorists and commuters who were stuck in traffic. “This is public service on our part,” said Candy de Guzman, a Phoenix dealer. “We are giving back what is due to our customers, especially the loyal ones. We have no intention on our part to cause tremendous traffic,” she said in an interview.

The Phoenix dealer, whose stations are located in Santa Rosa, Mall of Asia and Molino 2, said the Phoenix outlet on Macapagal Avenue recorded 287 transactions and generated 12,400 liters in fuel sales in just two hours.

“The second station that generated the most volume is Santa Rosa, in which we served 365 customers for two hours,” said de Guzman. “It was a mix of private and public utility vehicles.”

Phoenix is also providing discounts—P2 per liter on gasoline, P1 per liter on diesel and 20 percent off on all lubricant products—to Uber drivers. Other marketing schemes launched by Phoenix include the Scratch-a-Prize promo, Summer Promo and Weekend Promo.

“These promotional stuff need to be approved by the DTI [Department of Trade and Industry] first. We thoroughly study each and every area possible where we plan to implement the promo. We do not do this to create a price war. We do this to match other offerings of gasoline stations. It may not necessarily be the same kind of discount,” the Phoenix dealer said.

Lifetime fuel supply

Seaoil Philippines has likewise joined the fray.

It launched the first raffle promo of its kind in the Philippines that will be giving four lucky motorists their lifetime supply of Seaoil fuels.

Seaoil CEO Glenn Yu said in an interview that this is the company’s own way of thanking its loyal customers. Moreover, he said, this is a wise move to entice motorists who have yet to gas up with the fourth-largest oil player in the country. Yu said that based on DOE figures, Seaoil has a market share of 5.9 percent.

“This is not only to show our appreciation to loyal Seaoil customers, we also would like motorists to take this opportunity to try our fuel products and ultimately become Seaoil believers,” Yu added.

Seaoil wants to highlight its top three qualities, which, Yu said, make the oil firm different from the rest. First, Seaoil’s base fuels are imported from advanced refineries in Japan, South Korea and Singapore, ensuring world-class quality. Second, its fuels are monitored and tested at least three times daily at the retail stations for consistency. Third, Seaoil fuels are the only ones in the Philippines that are powered with STP additives, known for superior engine clean-up and keep-clean properties resulting in improved performance.

Better price at the right quality

A consumer group led by a former undersecretary at the Department of Trade and Industry urged the DOE to strictly monitor the quality of the petroleum products regardless if these are sold at a discount or not.

“Competition in promos and discounts are part of any business models to get more consumers to like their respective brands. The permit for sales promotions is easily accessible to all. What I have not observed these days is monitoring on the quality of the products in the market,” said Victor Dimaguiba, president of Laban Konsyumer Inc.

He recalled that during his days in the government, his team would usually visit gasoline stations to get samples and have the fuel products tested. “I hardly read and see if it is done at all,” Dimaguiba noted.

The DOE assured that random tests are being conducted.

Dimaguiba, however, urged the agency to make public the results of these tests to inform the consumers. Promos are useless if the fuel products do not meet the standards, he noted.

He also took note of how the retail market is maturing. Most of the independent players have captured a better market share from the “Big Three”.

“One had even a budget to sustain a professional basketball team. The other hosts the pre-UAAP and NCAA basketball seasons. The retail market is managed by entrepreneurs and former officials of the major oil companies so they have the niche of how to run the operations,” he said.

Indeed, competition has done wonders since the downstream oil industry was deregulated. It has benefited both consumers and industry players.

Image Credits: Bloomberg News