Pandemic: a ‘gift’ to oil companies?

Amid the lingering contagion and spike in crude price, local petro firms continue to rake in mega profits

THE so-called industry take, or the amount comprising the recovery of all the operating costs and profit margin of an oil company, is the third largest component of the retail price of gasoline and diesel.

According to data released by the Department of Energy (DOE), import cost made up 47 percent of the retail price of gasoline during the week of August 16 to 22; taxes at 24 percent; industry take at 21 percent; and ethanol at 8 percent.

At P73.75 per liter of gasoline, this would mean that P34.34 comprised the world market price and landed cost; various taxes at P17.90; industry take at P15.69; and ethanol at P5.81.

Currently, the Philippines mandates a blending of 10 percent ethanol on all gasoline products and 5 percent biofuel for diesel sold across the country through the Biofuels Act of 2006 or Republic Act 9637. Ethanol is made from sugar while the feedstock for biodiesel is coconut oil.

The retail price of diesel, at P73.9 per liter of the same week, is broken down thus: P45.4 (61 percent), import cost; P13.92 (19 percent), taxes; P12.86 (17 percent), industry take; and P1.73 (2 percent), CME or coco-methyl ester.

“These are just estimates. We won’t know exactly until the oil firms submit a detailed computation, which is what the DOE has been pushing for,” said DOE Director for Oil Industry Management Bureau (OIMB) Rino Abad.

The agency issued a department circular mandating unbundling in 2019, but it was subjected to an injunction by the local courts. The DOE maintains that unbundling of the cost of petroleum retail products will determine their true and passed-on costs.

Resort to Congress

Energy Undersecretary Gerardo Erquiza: “Our hands are tied. We can appeal but it is really up to the oil firms to heed our requests.”

THE DOE’s next move was to ask Congress to amend the Oil Deregulation Law to provide a framework for the government to effectively intervene and address sudden, prolonged oil price spikes.

The House Committee on Energy has approved amendments to the law, institutionalizing the minimum inventory requirement and pushing for the unbundling of fuel prices.

Pump prices went up for 11 consecutive weeks since the start of the year up to March 15, followed by a price rollback the week after, then another price increase at end-March.

In April, pump prices went down twice and increased three times. A mix of oil price hikes and rollbacks occurred in May.

Based on figures, there was a 22-percent increase in gasoline prices to P77.71 per liter in May from P63.58 per liter in January, and diesel pump prices soared by 49 percent to P75.92 per liter in May from P50.95 per liter in January.

Oil prices for the whole month of June went up as against a whole month of price rollbacks for July. For August, there were three weeks of price reduction for diesel and kerosene, while gasoline prices went down twice.

On Monday this week, oil firms announced that they would raise pump prices starting August 23. They unleashed an increase of P0.70 per liter in gasoline prices, P2.60 per liter hike in diesel, and P2.80 upward adjustment for kerosene.

Prior to this week’s oil price hike, the year-to-date total adjustments stood at a net increase of P17.45/liter for gasoline, P29.10/liter for diesel and P24.30/liter for kerosene.

During the successive increases in oil prices, many public utility vehicle (PUV) drivers opted not to ply their usual routes, while provincial buses and taxis were operating only at 20 percent to 30 percent capacity, which led to a severe lack of available public transportation.

In light of this, Senator Sherwin Gatchalian filed Resolution 78, urging Congress to look into the impact of the ongoing war between Russia and Ukraine on the country’s energy security and affordability.

“There is a need for Congress to be apprised of the short-, medium- and long-term effects and implications of the Russian invasion of Ukraine on the Philippine economy, in particular, the country’s oil supply and the effects of the continuous elevated global oil and coal prices on domestic oil and petroleum products,” the senator said.

Gatchalian, who chaired the Committee on Energy in the 18th Congress, conducted a hearing last March to seek specific solutions and programs of the DOE and relevant government agencies to mitigate the impact of the Russia-Ukraine crisis on the country’s oil supply and prices.

Petron buyback

There had been suggestions for government to buy back Petron Corp., which supplies about 40 percent of the country’s oil requirements.

Petron President Ramon Ang said that he would even be willing to sell Petron even through installments over five years if government wants it back. This was Ang’s reply when militant groups accused Petron of raking in profits amid skyrocketing oil prices.

In the first half of the year, Petron reported a net income of P7.71 billion from P3.87 billion in the same period last year. Consolidated revenues surged by 129 percent year-on-year to P398.52 billion, fueled by the sustained increase in sales volume and prices.

Pilipinas Shell Petroleum Corp. (PSPC) also saw its net income surge to P7.8 billion at end-June this year, 255 percent more than the P2.2 billion recorded in the same period last year.

Other oil firms reported hefty profits mainly due to higher revenues, fueled by improving sales volume and prices.

Since the oil industry is deregulated, which means the DOE could not intervene or dictate prices, the agency has asked oil firms to provide discounts to consumers and temper the price increases by possibly implementing the upwards price adjustments in weekly installments.

“Our hands are tied. We can appeal but it is really up to the oil firms to heed our requests,” said Energy Undersecretary Gerardo Erquiza.

Image credits: Anthony Furgison | Dreamstime.com, Ed davad, Facebook.com/doegovph


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