Cartel Causes Regional Disparity in Oil Prices


MANILA — It would be interesting to watch how the Oil Deregulation Law Task Force will resolve the complaint against the Big Three filed by Cebuano public officials and businessmen. The said task force has already subpoenaed the executives of Petron Corp., Pilipinas Shell and Chevron Philippines to answer charges of predatory pricing.

The complaint stemmed from the findings of a survey conducted by the Cebu Chamber of Commerce and Industry (CCCI). It showed that oil products in the province were priced by P5 to P8 ($0.10 to $0.168 at the May 30, 2009 rate of $1=P47.35) per liter more than those in Luzon and Mindanao.

This is not the first time that the huge disparity in oil prices between various areas was brought to public attention. In December last year, local officials of Sulu raised a similar issue. They said that the price of an 11-kilogram (kg) tank of liquefied petroleum gas (LPG) was almost 40 percent higher in their province than in nearby Zamboanga City.

Freight costs?

According to the Big Three, freight costs explain the disparity in prices of oil products in different areas. While this may be true to some degree, such excuse still could not justify the very huge difference in pump prices.

At current price levels, the P5 to P8-difference is equivalent to 15 to 24 percent of the average retail price in Metro Manila. Twenty-four percent, or 40 percent in the case of LPG in Sulu, is simply too much to represent the cost of transporting the fuel. It is obvious that other factors explain why pump prices tend to be much higher in other areas, especially outside Luzon and major urban centers.

Such large difference in pump prices in various areas could only be the result of the continued domination of the Big Three oil cartel. A look at how pump stations are distributed among the oil firms and across the regions would prove illustrative.

Intense domination

As of December 2007, there are 3,737 pump stations nationwide. Of the said number, 80 percent are controlled by the Big Three; new players, 14 percent and independent players (those with less than five branches), six percent.

The Big Three’s domination is most intense in the Visayas where they control 615 of the 636 pump stations. In Central Visayas where Cebu is located, Petron, Shell and Chevron control 235 of the 239 pump stations. In Mindanao, the Big Three dominate 568 of the 652 pump stations. In the Autonomous Region of Muslim Mindanao (ARMM), where Sulu belongs, the oil cartel controls 29 of the 31 pump stations.

With such intensity of domination, it should be no wonder that the Big Three could more easily dictate higher prices like the case in Cebu and Sulu. The question now is will the Department of Energy (DOE) and Department of Justice (DOJ) Task Force recognize that the regional price disparity exists because of the cartel?

Little hope

Unfortunately, there is little hope for consumers. For one, the DOE-DOJ Task Force has repeatedly absolved the Big Three of price manipulation. In the ongoing court case filed by a civil society group against Petron, Shell and Chevron for cartelization, the task force has once again come to the rescue of the oil cartel.

There is no evidence that the Big Three is operating as a cartel, the DOE-DOJ Task Force concluded in a report it submitted last February to the court hearing the said case.

Note also that aside from the task force, the Solicitor General has also asked the court to reverse its order to open the Big Three’s books of account for scrutiny. Government agencies have no mandate to audit the oil firms, the Solicitor General argued. It is obvious that Malacañang is determined to protect the interests of the oil cartel.

At consumers’ expense

In the end, the issue boils down to policy. The Big Three has effectively used the Oil Deregulation Law to strengthen and consolidate their monopoly control of the domestic petroleum market.

We should not be surprised that the DOE-DOJ Task Force will dismiss the complaint of Cebu’s local leaders and businessmen as baseless. The concept of deregulation is to allow so-called “market forces” to set the “fair price”. And the issues of freight costs, distribution costs, etc. in explaining regional disparity in pump prices could easily and conveniently fall under this neoliberal dogma.

Again, all these are at the expense of hapless consumers. (

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