Gov't mulls frequent oil price changes

Government is looking at the possibility of implementing frequent fuel price adjustments (upward or downward) to directly link domestic prices with those of global markets.

In a press briefing, Energy Secretary Mario V. Tiaoqui said frequent price adjustments would reflect the true situation of world crude prices under a deregulated environment.

"That is a situation where we would like to be in," Tiaoqui stated. "In other countries where the oil industries are also deregulated, frequent adjustments in the retail prices of oil are everyday occurences and are widely accepted. With these adjustments, the public can easily connect local price movements with world price trends."

Crude prices purchased from the Dubai/Oman spot market, rose from $10.02 per barrel in February 1999 to as high as $28.41 in March 7 this year. In slipped back to the $22 level after March 27 when the Organization of Petroleum Exporting Countries (OPEC) decided to pump in an additional 1.4 million barrels of oil per day to ease the pressure on world crude prices.

In real peso terms, that means that Dubai crude rose from roughly P400 per barrel in the first quarter of 1999 to P1,100.87 as of end February.

However, local pump prices rose by an average 36.5 percent in the same period. Roughly translated, that would mean that the average retail price of local petroleum products of P11.20 per liter in March last year rose to only P15.29 a year later.

Energy officials expressed belief that data such as the foregoing would allow the public to appreciate the difficulties of the industry in relation to the country's dependence on imported crude oil and the accompanying price adjustments.

"The public today has access to all these figures and they expect these figures to be reflected in the retail prices as soon as possible. Other countries in the region, in fact, have already began to adjust their prices downward."

Meanwhile, Tiaoqui said that frequent prices adjustments would intensify the competition among the industry players, which in turn could benefit the public. "If they want to get ahead of the competition, oil players will have to be more proactive in adjusting their prices."

Industry players pointed out that competitive pressures and pricing will remain one of the biggest considerations in price setting in the existing deregulated environment.

The local oil industry players are concerned not only with the price of imported crude oil and the foreign exchange market. Players in the oil industry must also look at the transportation cost, rate of return, and competition.