Oil firms say price rollback likely in January

Oil companies agreed yesterday that a price rollback is possible next month, but not by P1 per liter as suggested by Energy Secretary Mario V. Tiaoqui.

Executives of Petron Corp. , Pilipinas Shell Petroleum Corp. and Unioil Petroleum Corp. said the figure of the Department of Energy (DOE) is too high, and does not take into consideration other factors affecting local pump prices.

They said it is not sufficient to consider the drop in Dubai crude oil prices as the sole basis for implementing a price rollback .

"We still have to quantify other factors to come up with a realistic amount for a possible rollback," said Shell vice president Rey Gamboa.

Among the factors to consider is the lifting of the three-month suspension of the three-percent tariff on imported crude oil and refined petroleum products in January which is said to be equivalent to P0.30 per liter. Also to be considered is the peso-dollar exchange rate.

"Do not forget that the oil companies did not implement any price increases in the months of November and December. Thus we still have to consider our underrecoveries and previous losses," Gamboa said. Shell claims underrecoveries of P1.20 to P1.40 per liter for the two-month period.

Recently, the majors have been swamped by appeals from their dealers or service stations for an increase in the dealer’s margin.

"That issue must also be factored in including the costs of implementing the provisions of the Clean Air Act of 1999," oil executives pointed out. In the absence of sufficient imported equipment to meet the strict provisions, oil companies said importation of low sulfur petroleum products may be the only alternative.

Petron corporate communications manager Antonio Pelayo agreed with the points raised by Shell, adding that the industry as well as energy department must take in consideration the results of the January meeting of the Organization of Petroleum Exporting Countries (OPEC).

Based on wire reports, OPEC is poised to announce a one-million barrels of oil per day production cutback. The world price of crude oil has dropped to approximately $23 per barrel, which is way below the desired range of $25 to $28 per barrel.

Dubai crude as of Dec. 27 was quoted at $19.91, Brent was at $22 per barrel, and WTI at $24.

Unioil spokesperson Lawrence V. Luang said government should consider the fact that new players are new importers and that the interest rates for dollar accounts through letters of credits (L/Cs) are relatively higher in the past few months.

"They (government) should factor in not only high interest rates but also our cost of purchase ex-refinery and other costs of financing," Luang told The STAR.

Oil executives said the best promise they could make is that there will be no price increase in January. Should OPEC decide to cut production, its impact would only be felt in February.

Last Wednesday, the energy department said a P1 rollback was a "good possibility" owing to the weakening of world crude prices.

Tiaoqui, however, said they would still be meeting with representatives of the oil companies to thresh out the possibilities on a rollback as they (oil companies) have already declared that there would not be any price adjustments next month.

Last week, the Consumer and Oil Price Watch said oil companies should roll back prices by P1.40 per liter next month.

Raul T. Concepcion, head of the consumer group, said world crude prices have been making "a nosedive in the past few weeks while the value of the peso vis-a-vis the US dollar has improved."