Rollbacks Welcome but Pricing Transparency Still Necessary

The recent series of petroleum pump price rollbacks are welcome but oil firms should be transparent with their pricing particularly in the wake of windfall profits earned by oil firms due to record-high world crude prices.

BY IBON FOUNDATION
Posted by Bulatlat.com
Vol. VIII, No. 28, August 17-23, 2008

The recent series of petroleum pump price rollbacks are welcome but oil firms should be transparent with their pricing particularly in the wake of windfall profits earned by oil firms due to record-high world crude prices.

According to IBON research head Sonny Africa, how the oil firms determine pricing and the amount of rollback remains a mystery.

Unless these firms reveal their pricing structure, the public remains captive to the whims of oil companies and dependent on the government’s “moral persuasion,” he added.

Because of the practice of transfer pricing by global oil firms, it has become increasingly difficult for the Department of Energy (DoE) and other stakeholder groups to determine how much local pump prices should move in relation to global oil prices and the peso-dollar exchange rate. Through transfer pricing, oil transnational firms are able to artificially bloat the price of oil as it passes through the different stages of production and the distribution chain, which they control.

Global oil prices whether Dubai spot crude or Mean of Platt’s Singapore, which are the benchmarks that oil firms use in determining local pump prices, are unreliable as they are bloated by speculation.

A 2006 study by the U.S. Senate showed that 30 percent or more of world crude oil prices are driven by speculation. Locally, IBON estimates that prevailing pump prices of unleaded gasoline are overpriced by 23 percent because of speculation.

”Oil firms have been allowed to further achieve monopoly control over the industry because of deregulation, which makes urgent the need for government regulation and control over the local oil sector to help ensure transparency in pricing,” said Africa. Posted by (Bulatlat.com)