Oil firms-imposed price adjustments are higher than what should be – by P 2.41 per liter for diesel and P4.76 per liter for gasoline, based on a DOE-recognized formula. The Big Three, a Duterte backer and other oil firms, rake in tens of millions of pesos daily from profiteering.
By ARNOLD PADILLA
On July 3, transport officials finally green-lighted the return of jeepneys on the roads of Metro Manila. But the order, contained in a memo by the Land Transportation Franchising and Regulatory Board (LTFRB), came with restrictions tougher than those applied to other modes of public transport. Aside from the usual health and safety protocols, jeepneys would have to pass additional roadworthiness checks and standards set by the Land Transportation Office (LTO), including compliance with the Clean Air Act. Such added restraints are apparently part of government’s contentious phaseout scheme of the jeepneys.
These are on top of the limits set on the number of jeepneys (6,000) and the routes (49) that they are allowed to ply on. Such figures are a very small fraction of how many jeepneys are operating in Metro Manila (estimates vary widely, from 50,000 to as high as 75,000) and the existing jeepney routes (about 641) prior to the COVID-19 lockdown. Those who will be authorized to ply the routes can carry just half of their unit’s capacity to abide by physical distancing rules.
All these adversely impact the families who rely on the jeepney sector for their source of livelihood. But their plight is aggravated even further by the continued profiteering of the oil companies, which apparently became more abusive during the pandemic. Based on available data from the Department of Energy’s (DOE) Oil Monitor, it appears that as of July 7, the oil firms have implemented price adjustments for diesel that are about P2.41 per liter higher than what should have been following global price movements. For gasoline, the difference is about P4.76 per liter. Part of this amount is the 12-percent value-added tax or VAT (i.e., P0.29 per liter for diesel and P0.57 for gasoline).
For the poor jeepney drivers and their families who are fighting for survival, such form of overpricing at the pump further chips away at their already extremely limited opportunities to earn a living. According to a study by the National Center for Transportation Studies (NCTS), jeepneys that ply a short route (i.e., coverage distance of five kilometers or less) consume 11 liters of diesel per day. Jeepneys on a medium route (six to nine kilometers) use 19.97 liters daily; long route (10 to 19 kilometers), 20.64 liters; and extra-long route (20 kilometers and above), 31.64 liters.
This means that at an overpricing of P2.41 per liter for diesel, oil firms and the government through the VAT take away almost P27 in potential income every day from jeepney drivers plying a short route. For those on a medium to long route, the oil firms and government deprive drivers of P48 to 50 daily in would-be income due to overpricing; and more than P76 per day for those on extra-long route. That jeepney drivers are likely to earn less than half of their usual daily income because of the COVID-19 crisis accentuates the injustice and abuse that the profiteering oil firms and the government inflict on them.
As of July 9, the pump price of diesel in Metro Manila ranges from P30.00 to P42.57 per liter. Jeepney drivers thus spend P330 to as much P1,347 for diesel every day, depending on their route.
While their units are not being singled out for phaseout through more stringent restrictions, drivers in other modes of public transport such as the bus, UV express, taxi, the TNVS and tricycle nonetheless suffer the same exploitation in the hands of oil companies and government like their jeepney counterparts. In fact, gasoline, which these transport units mostly use, is overpriced by twice as much than that of diesel. Private motorists, including ordinary workers that rely on motorcycle as their primary means of mobility, are affected as well.
The overpricing estimates are limited only to the adjustments driven by the movement in global oil prices (as indicated by the Mean of Platts Singapore or MOPS) and fluctuations in the foreign exchange (forex) rate. MOPS is the international benchmark used by the DOE in monitoring price adjustments for finished petroleum products like diesel and gasoline. They do not include other variables that impact actual pump prices and/or price movements such as the additional oil import duty of P1.50 to 1.60 per liter imposed by the Duterte administration starting in June. Also excluded are the additional excise tax of P1 per liter for gasoline and P1.50 per liter for diesel that took effect last January under the final tranche of Duterte’s Tax Reform for Acceleration and Inclusion (TRAIN) law.
This method of using the MOPS and forex is one of the alternative formulas that the DOE recognizes in estimating weekly price adjustments.
Based on the weekly changes in MOPS and forex, the pump price of diesel should have already declined by about P11.25 per liter from the start of the year up to the last adjustments on July 7. But actual price adjustments for diesel (excluding the new import duty) have reached only a net decrease of P8.84 per liter during the said period – or a discrepancy of P2.41 per liter. Similarly, the pump price of gasoline should have fallen by P10.38 per liter, but actual adjustments in local prices only posted a net decrease of P5.62 per liter or a discrepancy P4.76 per liter.
It is expected that oil consumption will sharply fall this year due to the COVID-19 pandemic. One estimate pegged the decline in global demand at 4.9 percent. But this matters significantly less to the giant oil companies that earn super profits by virtue of their monopoly control over the entire global oil industry, including through their profiteering units in the Philippines.
Even if assuming, for instance, that domestic oil consumption declined by half because of COVID-19, oil firms would still have earned an estimated P38.06 million per day from diesel and P45.42 million per day from gasoline due to profiteering from the weekly price adjustments. Out of this combined P83.48 million per day in additional profits from overpricing, about P10.02 million would have gone to the Duterte government in the form of the 12-percent VAT. Of the remaining P73.46 million, more than half or around P37.21 million would have gone to the traditional Big Three oil firms (based on market share) – Petron, P 18.06 million; Shell, P 13.58 million; and Chevron, P5.56 million. Meanwhile, about P5.19 million would have gone to Phoenix Petroleum, the fourth largest oil firm in the country in terms of market share. It is owned by Dennis Uy, a close supporter and campaign donor of President Duterte.
All these are in addition to the usual profits and oil tax revenues that the oil companies and government squeeze from the jeepney and other public transport drivers and private motorists as well as from all ordinary end-consumers who ultimately shoulder the production costs of goods and services bloated by overpriced oil. Profiteering and overpricing are easily done because under oil deregulation, which has been in place for more than two decades now, oil firms can automatically adjust pump prices.
Overall, global oil prices have fallen steeply as entire transport systems, factories, establishments and economies worldwide ground to a halt. The spot price of Dubai crude, the Philippines’ international benchmark for crude oil prices, declined to as low as USD 23.28 per barrel in April before recovering in May (USD 31.23) and June (USD 40.14), as monitored by the International Monetary Fund (IMF). It was the lowest monthly spot price of Dubai crude since posting USD 17.53 a barrel in November 2001.
But the country could not take full advantage of lower oil prices to help reinvigorate the economy, including the livelihood of jeepney drivers and others that rely on public transport for income due to the unconstrained profiteering by the oil firms. While prices are lower in absolute terms, deregulated price setting, in addition to monopoly pricing, still allows oil companies to exploit the public with artificially bloated pump prices and undermine economic recovery. The COVID-19 crisis further highlights the need and urgency for policy makers to reverse the regime of oil deregulation and effectively control domestic oil prices to protect the people’s welfare and advance the national interest.