Global Oil Prices Fell 5X Faster Than Local Pump Prices in 2008 – Bayan

Multisectoral group Bagong Alyansang Makabayan (Bayan) disclosed today that global crude prices fell five times faster than retail pump prices in 2008, resulting in overpricing that reached as high as P12.60 per liter for kerosene and P9.56 for diesel last year.

The group released its latest study amid a fresh wave of oil price hikes that saw pump prices jump by as much as P5 per liter in the last three weeks.

According to Bayan, the average price of the benchmark Dubai crude fell by around 3.72% per month last year but the average retail pump prices in the Philippines during the same period only declined by about 0.81% per month.

The huge declines in global oil prices occurred in the second half of 2008 when Dubai crude fell by about 19.49% per month from August to December. During the same months, retail pump prices in the country declined by only around 9.33% a month.

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By not reflecting the ideal price adjustments in their pump stations based on posted global prices, oil companies led by Petron Corporation, Pilipinas Shell, and Chevron Philippines or the so-called “Big Three”, have charged consumers with hugely overpriced petroleum products, the group noted.

Bayan said that last year, kerosene was overpriced by P12.60 per liter; diesel, P9.56; unleaded gasoline, P3.57; and liquefied petroleum gas (LPG), P60.80 per 11-kilogram (kg) cylinder tank.

The group used the monthly averages of Dubai crude prices as monitored by the International Monetary Fund (IMF) and the US dollar – Philippine peso exchange rate as monitored by the Bangko Sentral ng Pilipinas (BSP). Dubai crude prices were then converted into peso, which Bayan tracked in comparison with actual price adjustments in the country as monitored by the Department of Energy (DOE).

Its overpricing estimates, on the other hand, computed the impact of monthly adjustments in Dubai crude prices on retail pump prices and compared the results with actual changes implemented by oil firms in the country.

The group said that no matter how oil firms deny the allegations that they are overcharging the consumers, the widespread public perception that oil companies are abusive and profit-hungry will remain as long as they are allowed to automatically increase their prices and at the same time not compelled to publicly divulge how they compute their price adjustments.

Bayan pointed out that the unresolved and persistent issue of overpricing can only be settled if Republic Act (RA) 8479 or the Oil Deregulation Law is scrapped to allow effective state regulation of the downstream oil industry. #

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