Probe on findings of Independent Oil Price Review Committee urged

MANILA — Two lawmakers are not convinced that the findings of the Independent Oil Price Review Committee (IOPRC) are correct.

Bayan Muna Rep. Teddy Casiño and Gabriela Women’s Party Rep. Emmi de Jesus both denounced the findings of the IOPRC as inaccurate and somewhat biased in favor of the oil companies. They said the results of IOPRC should be explained because there are separate studies that reveal that the oil cartel is guilty of massive overpricing.

Last week, the IOPRC said that contrary to popular belief, oil companies are not overpricing their fuel products and are, in fact, merely tracking international price adjustments. The IOPRC released its findings after five months of research and investigations into the records of the oil companies.

In a press statement, the oil price review committee said local pump prices track international movement of oil prices; that there is no over-pricing; and that oil companies enjoy reasonable profits. The committee also said current prices without subsidy encourage economic use of fuel, and that local taxes and oil company gross margins are lower in todays deregulated environment (1999-2012) versus a regulated environment (prior to 1998).

The rest of the committee’s findings also appeared to echo the arguments of oil companies after it said that the records of oil company profit margins do not show any overpricing of P8 ($0.19) per liter for diesel and P16 ($0.38) per liter of gasoline as alleged by NGOs and other gov’t planning agency and transport groups.

Casiño said the IOPRC’s findings should be scrutinized more closely considering that a separate study by the Bagong Alyansang Makabayan (Bayan) showed that since 1999 to July 2012 diesel has been overpriced by P10.26 ($0.24).

“The main findings of the panel are a no brainer to those who are familiar with similar audits in the past by the Department of Energy (DOE) of commissioning supposedly independent experts to review the Oil Deregulation Law (ODL) and pricing practices of oil companies. This study is now the third such review in the last seven years commissioned by the DOE to sanitize the high and increasing pump prices and to deodorize the ODL,” the progressive solon said.

Casiño said the IOPRC arrived at its “flawed conclusions” because it ignored repeated proposals of consumers and cause-oriented groups like Bayan that it closely scrutinize the links between the biggest oil companies in the Philippines with the world’s oil giants.

“During the public consultations with the IOPRC, we pushed for an in-depth probe on international supply contracts between the global oil giants and their local units and affiliates to determine how much they buy their oil supply and under what terms. The biggest oil firms in the country – Petron, Shell, Chevron and Total – which together control more than 80 percent of the domestic market, buy oil from foreign partners or mother units abroad at much cheaper prices compared to published prices in Dubai and Singapore. Such monopoly pricing is compounded by the price-bloating effects of speculation by global banks, financial firms and the giant oil companies themselves,” he explained.

“Taxpayers’ money was wasted on this audit. The IOPRC ended up defending the oil companies.”

Casiño also pointed out that similar independent oil reviews have been used by the Department of Energy temper increasing public discontent due to rising oil prices.

There have been previous independent reviews in 2005 and 2008.

For its part, Bayan its its recent study claimed that as of July 2012, global monopoly pricing and speculation account for some 59 percent to 73 percent of global crude oil prices. The group cited data from the US’s Energy Information Administration that a barrel of crude oil can be produced with a cost of just $26.63 to $40.46 per barrel, which is way below the posted global price of Dubai crude (the country’s benchmark) of $99.22 per barrel, as of July.

The multisectoral alliance said the difference of $58.76 to $72.59 per barrel between the estimated production cost and the posted price roughly represents the impact of global speculation and monopoly pricing. The group used the monthly movement of global oil prices and foreign exchange rates and their estimated impact on local pump prices from 1999 to the present, or the whole period under the current deregulation law (Republic Act 8479). From January to July 2012 alone, diesel was overpriced by ?1.64 ($0.04) per liter.

Casiño said that the super-bloated global prices are directly passed on to Filipino consumers because of deregulation,

“I doubt if the oil firms are faithfully reflecting global price movements in local pump stations as claimed by the IOPRC. Based on Bayan’s own tracking of the impact of monthly fluctuations in global prices and foreign exchange rate, diesel is overpriced by around ?10.26 ($0.24) per liter, as of July,” he said.

Casiño said the IOPRC study used data voluntarily provided by the oil companies themselves, and this is what made its findings biased in the latter’s favor.

According to Casiño, the IOPRC appears not to have factored the bloated prices of oil and petroleum products in the provinces and rural areas, which are usually higher by five to seven pesos compared to prices in the National Capital Region (NCR). He also said the committee did not have access to the supply contracts of the oil companies and thus could not account for the embedded profits made between the mother company and their local subsidiary.

“Shell, for example, buys oil from subsidiaries abroad so the reported landed cost in the Philippines already include profits from transfer pricing, which are not reported by the local subsidiary. Without seeing the supply contracts, it would be naive to conclude that the profits of the oil companies decreased dramatically under deregulation,” he said.

He also ventured to point out that the committee apparently did not conduct an actual audit of depot inventory.

Without an inventory valuation, the windfall profits from selling lower priced inventories were not considered in the study.

“The IOPRC was dependent on data voluntarily provided by the oil companies. It did not have the power to subpoena sensitive documents. Given all this, the IOPRC’s study may have been incomplete and prone to bias. This may be the reason why they came up with the unbelievable conclusion that the oil cartel is not engaged in overpricing and profiteering,” he stressed. “In any case, we want these issues cleared when the committee presents its findings to Congress, hopefully soon,” said Casiño.

Junk oil deregulation

Gabriela’s De Jesus in the meantime had stronger words against the IOPRC. She called the review body “a co-conspirator of the Aquino administration in defending oil companies’ greed.”

“How can the IOPRC oil companies’ profit be reasonable when they operate as a cartel that dictates the rise and fall of oil prices without so much as a squeak from government? How can the Oil Deregulation Law be working when it escalates the suffering of the poor? The oil deregulation law is a license for the oil cartel to increase oil prices with impunity and to swindle the Filipino people daily,” she said.

The lawmaker reiterated the long standing demand for the scrapping of the deregulation law in the oil industry and said the government should implement a strategic and permanent solution through nationalization of the same.

Other sectors affected by oil overpricing

Another multisectoral alliance, the Koalisyon ng Progresibong Manggagawa at Mamamayan (KPMM) also decried the IOPRC’s findings.

“After five months, the IOPRC has failed to complete a thorough study of the actual workings of the oil industry. Its conclusion, that local oil companies are not carrying out overpricing, is therefore incorrect, misleading and anti-poor,” said Sammy Malunes, the group’s spokesman.

Malunes said it is ironic how the review committee praised the oil deregulation law when it was precisely what prevented it from gathering data relevant to its research. Like the lawmakers, he said that while the IOPRC set out to gather the views of various stakeholders on the issue of oil price hikes, “It ended up listening only to the big oil companies.”

The KPMM also took issue against the committee’s recommendation to deregulate the fares of public transportation in response to increases in the prices of petroleum products.