Shell losses mount due to price increase freeze

Pilipinas Shell Petroleum Corp. (Pilipinas Shell) reportedly has underrecoveries, or the accumulated losses due to the high price of imported crude oil, amounting to P700 million as of January this year.

The losses are a direct result of not having to increase of the prices of petroleum products since November last year. The last price hike was registered on Nov. 1, 1999 but that was for the month of October.

Likewise, the increase averaged only 42 centavos per liter despite Pilipinas Shell's declaration of a required 86 to 90-centavo per liter price increase.

In an interview, Pilipinas Shell president Oscar Reyes said that there was no way the losses can be recovered, except to increase prices of petroleum products.

However, he said that oil companies are prepared to "temper" the increase in the face of economic and social conditions of the country. "It is always a sensitive issue when it comes to a price hike."

Oil companies said that they would try to "hold out (any price increases) as long as possible." However, they admitted that not increasing prices sooner or later would only result in more losses for the oil companies.

The Nov. 1 hike was based on imported crude of $19.50 per barrel. On Nov. 2, the price of crude soared to $21.19 and on Wednesday, it rose to $23.19.

The December average price of crude was $23.65 and it was placed at $23.64 as of Tuesday. The average price of crude between Jan. 3 to 17 is $22.64 per barrel.

Reyes said that they are studying, with the Department of Energy (DOE), possible price adjustments based on the prevailing prices of imported crude oil, the value of the peso to the US dollar, the extend of their under recoveries, and other political and social considerations.

Earlier, Caltex Philippines Inc. said that they might just increase the prices of local petroleum products this month although it may be "tempered."

Caltex Phils. president Enrico Cavestany said that they are still holding talks with Energy Secretary Mario Tiaoqui.

"We will not take any action (price hike) yet... as we are conscious of the (weak) economy, and that we are amendable to temper our increases," Cavestany said in a telephone interview.

Unnamed Petron Corp. officials, meanwhile told The STAR that they "will not move, and will wait for results" referring to the meetings between the representatives of the oil companies and Tiaoqui, who was designated as representative of President Estrada.

In an interview last Tuesday, Tiaoqui said they have had several discussions since the start of the millennium.

"We are still looking for a trend (in the price of crude and foreign currency rates)," he said. "Although the adjustments may be tampered."

Cavestany said Caltex is inclined to seriously consider a suggestion by industrialist Raul Concepcion that the projected increase be spread out in three tranches or a monthly increase of roughly 30 centavos per liter in the first quarter of the year.

Concepcion predicted that the oil players would increase their price by an average 93 centavos per liter based on the now defunct automatic price mechanism (APM) implemented by the Energy Regulatory Board (ERB) before the industry was deregulated,

Officials of both Pilipinas Shell Petroleum Corp. and Petron Corp. said that they were not in a position "at the moment" to comment as they are still reviewing their statistics and other critical factors, like foreign currency adjustments and the price of imported crude oil.

In earlier interviews, Tiaoqui said he sees an increase of P0.50 to P0.60 per liter price increase this month.