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THE SIGNS announce the big news—a rollback in gasoline and diesel prices, which took effect at 7 a.m. on Thursday. Two days earlier, House Speaker Prospero Nograles threatened to tax oil firms’ windfall profits. LYN RILLON


Biggest oil price rollback

Diesel prices cut by P5 per liter, gasoline by P2

By Abigail L. Ho
Philippine Daily Inquirer
First Posted 01:22:00 10/31/2008

Filed Under: Oil & Gas - Downstream activities, Road Transport, Congress, Legislation

MANILA, Philippines?With world crude prices dropping significantly, most oil firms in the country Thursday cut gasoline and kerosene prices by P2 a liter, and diesel prices by P5 a liter?the biggest rollback yet for the fuel used by public buses and jeepneys.

One company, Unioil Petroleum Philippines Inc., effected higher price cuts?P2.50 a liter for gasoline and P6 a liter for diesel.

The price cuts came two days after Speaker Prospero Nograles threatened to impose a tax on windfall profits of oil firms to compel them to bring down their prices amid plunging world crude prices.

Some senators are still pushing for the tax on windfall profits, saying that the oil firms? price reductions are not enough.

?They are greedy,? said Sen. Miguel Zubiri, who claims that the price cuts should have been P7 to P8 per liter.

While welcoming the price reduction, the Pagkakaisa ng mga Samahan ng Tsuper at Operator Nationwide (Piston) said another rollback of the same magnitude was in order.

?This is a partial victory for us, in our call to have diesel go down to the P37-a-liter price level. But we?re expecting another big rollback next week, or as soon as possible,? Piston secretary general George San Mateo said.

The group, together with the Pangkalahatang Sanggunian Manila and Suburbs Drivers Association Nationwide Inc., Makati Jeepney Operators and Drivers Alliance Inc. and the Pasig and Malabon Jeepney Operators, recently staged a transport caravan calling for a big reduction in fuel prices.

Fare rollback

At the current price of diesel, it is already feasible to have a fare rollback of 50 centavos for jeepneys and P1 for buses, according to San Mateo.

Should the price of diesel go down to the P35-a-liter level, another 50-centavo fare reduction would be feasible, he said.

?That?s why Piston is pushing for another big rollback, so that both drivers and commuters can benefit,? San Mateo said.

The country?s three largest oil firms?Petron Corp., Pilipinas Shell Petroleum Corp. and Chevron Philippines Inc. (formerly Caltex)?implemented the price reduction at 7 a.m. Thursday, followed by PTT Philippines Corp. at 9 a.m.

Total (Philippines) Corp. and Eastern Petroleum Corp. slashed prices at noon.

Seaoil Philippines Inc. adjusted prices earlier at 12:01 a.m. Thursday, but only by P2 a liter for gasoline, diesel and kerosene.

It reduced diesel prices by another P2 a liter at 8 a.m., bringing its total rollback to P4 a liter for diesel.

Dubai crude

Data from the Department of Energy show that the regional benchmark Dubai crude had plunged to an average of $68 a barrel as of Oct. 29, almost $28 lower than the September average of $95.90 a barrel.

The price of unleaded gasoline, based on the Mean of Platts Singapore (MOPS), benchmark for refined petroleum products, also plummeted to an Oct. 1-29 average of $81 a barrel, from $107.10 a barrel last month.

Total reduction of P15.50

MOPS-based diesel slid to an average price of $90 a barrel in the first 29 days of October, from the September average price of $121.04 a barrel.

Since July 31, gasoline prices have gone down 13 times for a total of P15.50 a liter.

Diesel and kerosene prices, on the other hand, had been cut 12 times for a total of P16.50 and P13.50 a liter, respectively.

With the price cuts, prices of premium unleaded gasoline now range from P42.56 to P46.15 a liter, diesel from P38.95 to P41.09 a liter, and kerosene from P46.45 to P49.80 a liter.

The current diesel price range is now within striking distance of the P37-a-liter pump price that transport groups are demanding.

Oil firms in the country have been accused of being too slow in bringing down prices when world market prices drop and too fast in raising these when world prices go up.

P317 million a day

The militant Bagong Alyansang Makabayan (Bayan) said it was worth checking how much oil firms had earned during the period before the big rollback. The group said that the oil firms still reaped ?super profits.?

?From our earlier computations, we believe the oil firms earned a combined P317 million a day from the overpriced oil products during September and October. These earnings are huge and were collected at the expense of the consumers,? Bayan secretary general Renato M. Reyes Jr. said.

He said the oil price reduction of P5 a liter for diesel and P2 for gasoline was welcome but was long overdue.

?These reductions are positive steps but oil firms can still do more. The demand to bring pump prices back to P37 a liter for diesel is now more realizable,? Reyes said.

Open books

Sen. Edgardo Angara urged President Gloria Macapagal-Arroyo to use her authority to compel oil firms to open their books so that people would know if the price cuts were justifiable.

Reminding that oil companies were ?public utilities,? Angara said the President had ?custodial authority? to do so as she had supervision over the Energy Regulatory Commission.

?I will exercise my custodial authority as President of the Philippines to open your books,? was his ?suggestion? to Ms Arroyo in solving the apparent ?glacial? way oil companies were reducing pump prices when global oil prices were continuously going down.

The presidential directive will enable officials to verify the claims of oil companies that they have yet to recover their costs, according to Angara.

He noted how oil companies in the Philippines differed from those in countries like China and the United States where they tended to ?reflect immediately? the drop in crude oil prices at the pump.

Windfall tax measure

Angara encouraged the ways and means committee in the House of Representatives to come up with a windfall tax measure so that the excess profits of oil firms can benefit the people.

?It?s one fair way to distribute savings to the people,? he told reporters.

Zubiri also threw his support for a windfall tax measure, saying he would file one in the Senate once there was a bill in the House.

?We should go back to the prices of fuel five years ago which were between P28 and P31 per liter,? he said.

Prices could still go down

Research group Ibon Foundation questioned the way local oil firms priced their products, saying pump prices should be way lower than their current levels.

?As of Oct. 22, the price per barrel of Dubai crude was $59.63 and the foreign exchange rate was P48.22 per $1?which means that Dubai crude costs P2,875 per barrel,? the group said in a statement.

?The last time Dubai crude cost around that much was in March 2007 when it was P2,865 per barrel?with Dubai crude costing $59.05 and a forex rate of P48.52 to a dollar. The average pump price of diesel then was P31.90 and of regular gasoline P33.64. This is far from the average prevailing prices so far in October,? Ibon said.

Shell for transparency

To prevent questions like these from cropping up in the future, Shell country chair Edgar Chua said the oil refiner would be moving toward greater pricing transparency by reflecting weekly movements of product prices and foreign exchange.

Chua said this meant that oil price adjustments would no longer be moderated, whether upward or downward. With a report from Christine O. Avendańo

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