A month after pump prices surged as a result of the enactment of the Tax Reform for Acceleration and Inclusion (TRAIN) law, oil companies said sales volume remains “normal” and they even expect demand to grow.
“Sales volume is normal after the TRAIN law implementation,” Phoenix Petroleum Philippines Inc. Vice President of Corporate Affairs Raymond Zorilla said via SMS.
At end-2017, Phoenix had a total of 530 retail service stations. It posted record sales volume, revenues and net income last year.
Phoenix reported a net income of P1.79 billion for 2017, up 65 percent from the previous year. Sales volume increased by 17 percent to 1.76 billion liters, from 1.5 billion liters. Revenues, meanwhile, rose by 45 percent to P44.426 billion.
The oil firm attributed last year’s higher sales volume to the addition of new stations, acquisition of new direct commercial accounts across various industries, as well as the consolidation of the liquefied petroleum gas (LPG) business.
PTT Philippines Corp., which has 122 service stations in Luzon and Central Visayas, expects demand for petroleum products to continue.
This, despite the retail price for gasoline products now costing anywhere between P46 and P57 a liter. Diesel price now ranges from P35 to P41 per liter. Kerosene is sold anywhere from P47 to P55 per liter.
“We still expect demand to grow despite the implementation of TRAIN. Back in 2011-2014, crude prices were trading above $100 per barrel, but national demand continues to grow at a CAGR [compound annual growth rate] of 7 percent. Now, crude is trading below $70/bbl. Vehicles are becoming more fuel efficient, but consumption will continue to grow as our population grows,” said a PTT official, who asked not to be named.
The oil firm’s January sales is higher than in 2017, added the official, “since most of the motorists preferred to have their gas tanks full while fuel inventory is from the old stock.”
PTT plans to put up more stations this year—possibly 30—from last year’s 23 new outlets established.
Pilipinas Shell, for its part, said it “sees no impact” on retention of its current customer base for now.
“I think it is still too early to gauge because the TRAIN implementation is relatively new and we haven’t gathered yet the trending,” said Cesar Abaricia, the company’s media relations manager, in an interview.
A dealer at Petron Corp. also noted that an assessment of the TRAIN implementation is yet to be done in relation to its impact on sales volume.
The company, according to one of its officials, could be able to provide an assessment after the first three months of the year.
Oil firms submit to the Department of Energy (DOE) a monthly sales report due every 15th of the following month. However, some oil companies have yet to comply.
“January sales report is due for submission on February 15. Basically, we can’t make a conclusion on the final sales volume, as submission is still incomplete,” the agency said.
Under TRAIN, the excise tax on gasoline went up to P7 per liter, from P4.35 per liter; while the new tax rates of P2.50 per liter were imposed on diesel, P3 per liter on kerosene and P2.50 per liter on auto LPG.
Based on DOE estimates, gasoline prices are expected to cost an additional P2.97 per liter; diesel, P2.80 per liter; kerosene, P3.36 per liter; LPG for motor vehicles, P2.80 per liter; and LPG for household, P1.12 per kilogram.
No TRAIN violators
The DOE has cleared oil firms that were earlier alleged to have taken advantage of the tax-reform law by selling old inventories at much higher prices.
“We compared their submissions with historical data and, so far, there are no violations,” Energy Assistant Secretary Leonido Pulido said.
Earlier, the agency said more than 20 oil retailers took advantage of the tax reform. Random inspection on all 6,800 gasoline stations were conducted to verify whether the excise tax under the TRAIN law was properly imposed.
These include 408 Shell stations in Luzon from January 5 to 11; 245 Petron stations in Luzon from January 8 to 12; 37 Flying V stations in Luzon from January 9 to 11; and 178 Caltex stations—49 in Luzon, 84 in the Visayas and 45 in Mindanao—from January 13 to 14.
The oil companies were told to submit several documents, such as inventory as of December 31, 2017, and the withdrawal records from depots as of January 28. “We based it on historical records and usually that’s enough because their numbers should be within a reasonable range,” Pulido said.
Still, the agency’s initial assessment would have to be verified with the Bureau of Internal Revenue (BIR), saying the tax agency cannot provide official register books (ORBs) to the DOE since these are treated as confidential documents.
“Since the documents came from [oil firms], who will validate these? We based it on historical records, usually that’s not enough. But we wrote the BIR, confirming that the ORB is confidential, but they can confirm what [the oil firms] submitted to us are more or less accurate,” he said.
“I met with the BIR deputy commissioner and assistant commissioner. They agreed in principle [that there were no violations], but we haven’t received their formal reply,” the DOE official added.
However, three LPG retailers have violated administrative regulations and would be slapped with penalties.
“But we found three LPG retailers to have violated administrative rules. We have implemented requirements, such as posting of prices compliant with the TRAIN within their vicinity,” Pulido said.
The Senate Committee on Energy had said it wants to put in place mechanisms to monitor the levels of supply of petroleum products, including the imposition of stricter penalties for late and incorrect inventory submissions of oil companies, as well as for the negligence on the part of government agencies to monitor price movements.
“I can foresee that we need to penalize oil companies if they don’t submit their inventories on time or if they give incomplete or inaccurate information about their stock levels. With or without the additional excise taxes from the TRAIN law, these companies are still duty-bound to submit their monthly inventories. And the DOE should ensure their compliance,” Sen. Sherwin T. Gatchalian said.
Under Section 14 of the oil-deregulation law (Republic Act 8479), the DOE is mandated to maintain a periodic schedule of present and future total inventory of petroleum products in the country. Because of this, oil companies are required to submit a monthly report that details their sales and consumption levels, actual and projected importations, and inventory of oil products.
“So, even if oil companies and gas stations already raised prices using their new supply in accordance to TRAIN, they would still have to be audited by the DOE and determine whether they unduly increased their prices without any clear basis, in which case they will have to face the appropriate penalties and fines,” he said.
To mitigate any risk of volume decrease as a direct consequence of higher fuel prices, oil companies are implementing their respective rewards program, rebates and promotional offerings.
“As to market share of each company, it’s still primarily influenced by strategies, positioning, branding and promo gimmicks,” a PTT official commented.
Shell Marketing Manager Kit Bermudez said Shell service stations continue to implement various discounts, value-added service and loyalty programs to continue to entice motorists to gas up at different Shell stations.
“We are continuing our efforts in adding value to their everyday journeys via various rewarding programs and customer delight activities. These go with our long-standing commitment of providing quality products and unparalleled service across our 1,000+ retail stations nationwide.
We also continuously invest in enhancing our facilities and offers to ensure a great consumer experience every time, to create repeat visits and loyal behavior,” he said.
Some Petron stations provide free 1 kilo of rice for every P1,000 worth of fuel products. The freebies vary, as other Petron stations give free snacks.
Various oil retailers provide a P1-per-liter discount to jeepneys, buses and, sometimes, to GRAB drivers.
“With fuel prices increasing, we want to give the best value to our customers with improved products and services. One of these is the launch of our Phoenix PULSE Technology, with advanced cleaning and protection properties for enhanced power and acceleration. Our fuels are high-performing and priced reasonably, so our customers get more distance for every peso,” Zorilla said.
Energy Secretary Alfonso G. Cusi said fuel is essential to motorists. “They will continue to gas up, maybe not with the same gas station every time, because they need to in order to continue using their vehicles. The motorists, just like any consumer, will look for cheaper prices or gas up where he finds his money’s worth.”
Image credits: Petro Perutskyy | Dreamstime.com