DOE to oil firms: Price hike now, rollback next mo

If the oil companies increase their prices this month, the government will ask them to rollback their prices by the same amount next month, the Department of Energy (DOE) said yesterday.

In an interview, Energy Secretary Mario V. Tiaoqui said they have been talking with the oil companies individually in a bid to forestall any price adjustments this month. Tiaoqui said that if the oil companies insist on jacking up prices this month, "they will have to rollback the same amount next month."

Tiaoqui pointed out that world crude oil prices have been dropping while the peso has stabilized. Furthermore, government has suspended the three percent import tariff on crude oil up to January and this is equivalent to a reduction of P0.30 per liter, he added.

On the other hand, the oil companies are saying that they still have underrecoveries ranging from P0.65 to P0.68 per liter.

In the last 10 days of November, Dubai crude was trading at $29 per barrel then dropped to $27.65 last Friday.

"What we are discussing with the oil companies is looking for other measures to stall another price hike this month," Tiaoqui said, adding that he had been instructed by President Estrada to dissuade the oil companies from making price adjustments this month.

Oil companies said they have to recover their losses due to the dramatic drop in the value of the peso, which hurt their bottomline since all crude purchases are imported.

"If it holds at $28 per barrel, any increase today will have to result in a rollback in prices of the same amount next month. We are looking at a one-month period, and crude oil prices have weakened and the peso will stabilize," Tiaoqui said.

Meanwhile, Pilipinas Shell Petroleum Corp. country chairman Oscar Reyes said that they are experiencing an underrecovery of P0.68 per liter based on foreign exchange fluctuations. Nonetheless, Reyes said that they will look at the DOE proposal.

But we would look at the fundamentals (crude prices, forex) at that period before they could say whether they would indeed effect a rollback."

Under the Oil Deregulation law, the oil companies are free to set their own prices. But the government can exercise moral suasion and exert some form of pressure to convince the oil companies to temper or shelve any planned price increases.

Crude oil ex-Dubai dropped to $25.75 per barrel from an average price of $30.32 for the month of November. Likewise, the peso stabilized at $49.67 to the dollar compared to the P49.91 for the month of November.

In October, crude was quoted at $30.52 to the barrel while the peso was valued at P48.36 to the dollar.

Earlier, Petron Corp. said it wanted a P0.65 per liter price increase, claiming an average underrecovery of 44 centavos per liter for November plus an additional adjustment of roughly P0.20 per liter based on the adjustments of the crude prices and foreign exchange.