Bulatlat - The Philippines's alternative weekly magazine

IBON estimates show that in spite of recent oil price hikes, petroleum products in the country are underpriced by P1.39 ($0.03 based on the average exchange rate of $1:P47.60 for this year’s first quarter) per liter from January to March 2007. However, the said amount is still not enough to offset the overpricing that oil companies implemented in the past.

In the first three months of the year, the pump price of oil products has decreased by P1.17 per liter instead of increasing by 22 centavos as warranted by the movement of the Dubai crude spot price and the foreign exchange rate. From $51.69 per barrel in January, the spot price of Dubai crude jumped to $58.19 in March (1-19 average only) while the peso strengthened against the US dollar from P48.91 to 48.66 during the same period.

But a look at the annual overpricing or underpricing of petroleum products from 2000 to 2007 (as of March) shows that oil companies still owe the consumers around P4.40 per liter. The actual cumulative increases during this period reached P18.08 per liter, P4.40 higher than the ideal adjustment of P13.67. (See Table)

Summary of overpricing/(underpricing) of oil products 2000 – 2007 (In peso per liter)
Year	Ideal Adjustment	Actual Adjustment	Overpricing/ (Under-pricing)
2000	0.95	3.83	2.88
2001	-1.14	-2.26	-1.12
2002	3.22	0.75	-2.48
2003	1.34	2.62	1.28
2004	2.54	5.65	3.11
2005	6.20	7.04	0.84
2006	0.34	1.62	1.28
2007 (Jan.–Mar. only)	0.22	-1.17	-1.39
Total	13.67	18.08	4.40
IBON estimates based on DOE data

To compute the overpricing, IBON used the difference between the monthly averages of Dubai crude spot price and forex to determine their impact on the pump price. In March, for instance, a dollar adjustment in the Dubai crude price translates to a 34-centavo per liter change in the pump price while a peso adjustment in the forex translates to a 42-centavo change.

The tremendous domination that the transnational corporations (TNCs) in the global oil industry wield allows them to dictate and manipulate the prices of petroleum products. These same TNCs control the biggest oil companies in the Philippines namely, Shell, Chevron, Petron, and Total. The overpricing of oil products worsens the impact of frequent oil price hikes on people’s livelihood, the viability of small businesses, and the overall growth of the domestic economy.

Deregulation, through Republic Act No. 8479 or the Downstream Oil Industry Deregulation Law of 1998, gives these TNCs more room to pad the true cost of oil. Thus the repeal of RA 8479 must be one of the top priorities of those seeking a seat in the new Congress. In its place, a legislation that will effectively regulate the activities of all oil companies in the downstream and upstream oil industry must be passed. Such law and other important reforms shall pave the way for the eventual nationalization of the oil industry which is the only long-term solution to high, volatile, and unreasonable oil prices. Posted by Bulatlat

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