THE power of choice proved to be very helpful for motorists—public utility vehicle (PUV) drivers in particular—during the 10 consecutive weeks of oil price hikes that started August 31 of this year.
Aware that every centavo counts, motorists carefully planned their trips. They grabbed the best deals that shielded them from the continued escalating oil prices. They were strongly encouraged to exercise their power of choice in the selection of liquid fuel retail outlets that offer lower prices.
Oil firms offered price discounts—as much as P3 per liter—on top of existing promos like vaccination and loyalty incentives.
“The power of choice is definitely a very helpful tool for motorists. They became prudent and cautious. As a result, oil firms became more competitive than ever. They launched their respective promos and marketing strategies to lure more motorists and retain loyal ones,” Department of Energy (DOE) Director for Oil Management Bureau Rino Abad said in an interview.
During those weeks, gasoline prices rose by a total of P9.50 per liter, diesel by P9.10 per liter and kerosene by P8.60 per liter. The figures were based on the weekly price adjustments that were announced by the oil companies.
Meanwhile, Abad said the aggregate price increases for gasoline from January to December 20 of this year stood at P17.30 per liter; P14.40 for diesel; and P11.69 for kerosene.
Since the country is a net oil importer, any spike in world oil prices affects local pump prices. The DOE explained that the spikes were mainly brought about by the supply restrictions of the Organization of Petroleum Exporting Countries (OPEC) and the United States’ sanctions against Iran and Venezuela.
Weak peso
In addition to the developments in the global market, a weak peso also contributed to the spikes.
The price increases were temporarily halted in November. Oil firms implemented price rollbacks for diesel for five straight weeks for a total of P5.40 per liter. The price of gasoline, which also went down for five weeks, was reduced by P6.25 per liter. Kerosene price cuts for six consecutive weeks resulted in a total price drop of P5.55 per liter.
The DOE observed that OPEC’s decision to increase output stoked the release of crude oil stock from the US strategic petroleum reserves, which eventually augmented crude oil supply, and the surging Covid cases in China and Europe, which resulted in the reintroductions of lockdowns, were among the reasons for the shift in petroleum prices.
These successive price cuts, which lasted until December 13, calmed motorists who have been agonizing over relentless price increases.
However, the relief was short-lived as oil firms announced a fresh round of oil price increases for December 14, followed by another round of spike last December 21.
The shift was brought about by the pronouncement of OPEC that it does not expect the Omicron variant to slow oil demand. “OPEC released its price assessment that they will maintain current oil production plan despite Omicron. The market reacted. Now, we are back to price increases,” Abad said last week.
Since the oil industry is deregulated there is not much that the DOE could do to bring prices down. That’s why it asked Congress to amend the Downstream Oil Industry Deregulation Act of 1998, which authorizes the DOE to merely monitor the international and domestic price movements of petroleum products.
The agency had also wanted to suspend excise taxes on petroleum products. However, this could only be done through an executive order by the President, thus a new legislation is needed.
An amendment to the Oil Deregulation Law, meanwhile, could provide a framework for the government to intervene and address sudden prolonged oil price spikes, require unbundling of the cost of retail products to determine their true and the passed-on cost.
The DOE already issued a policy on unbundling, wherein oil firms are required to itemize their cost of petroleum products to determine if these can be lowered. However, oil firms secured restraining orders for the implementation of the 2019 circular.
“There is nothing to hide as the retail trade is competitive. The oil industry should unbundle prices. Consumers’ need to know is a universal and fundamental right,” said Victor Dimagiba, president of consumer advocacy group Laban Konsyumer Inc.
Buy back Petron?
SOME lawmakers had even proposed to again place the country’s lone oil refiner, Petron Corp., under government control to address spiraling oil prices.
Petron President Ramon S. Ang said the government could buy back the refiner through a five-year installment payment scheme.
“Anytime po, puwede ko pa ipautang [I can lend it to them] in over five years to pay. I swear, if gusto ng gobyerno bilhin, pagawan n’yo na ng [if the government really wants to buy it, they can do the] valuation,” Ang told lawmakers last month during a House committee on ways and means hearing.
The business tycoon even went on to say that if motorists want cheaper fuel prices, they should buy from new oil players because Petron, Shell and Caltex can’t afford to compete with them as their petroleum products are cheaper by at least P10.
The disparity was attributed to the new players’ “very efficient operations,” Ang said. Previously, Ang expressed concern over the rampant oil smuggling activities in the country.
“Hindi ko na pwedeng sabihin pa bakit sila ganun ka-efficient. Kayo na ho nakakaalam noon. Kasi sinabi ko naman sa inyo, napakagaling nila [I can’t keep asking why are they so efficient. You know the reason]. Everybody puts up their own port somewhere. So [there is so much] imported oil and diesel all over the country, nobody can monitor them. So, therefore, they are very efficient. [As a result, their] selling price is very low. That’s why [they can grab our] market share,” said Ang.
Whatever unresolved issues there are between oil firms and the government, it is ultimately the public that will reap the benefits, if any at all.
“There is no doubt that consumers will patronize the seller that sells the cheapest. That is the one good thing that came out of this,” Abad concluded.
