Another oil price rollback seen in November

The major oil companies are expected to roll back their prices early next month as world crude prices continued to soften over the past few weeks, it was disclosed yesterday.

Energy Secretary Vincent S. Perez said that based on their data, another price adjustment is possible next month. "Our data show that there is a possibility (of rollback) considering the drop in world crude prices," the energy chief said.

"The possibility of rollback this November is great because Dubai crude yesterday was $18.99 and the average for the month to date was $19.87," Petron Corp. vice president for finance Antonio Pelayo said.

But he said the possible price reduction next month would be tempered by increases in insurance and freight costs.

He said there are also possibilities for an increase in dealers’ margins. "We have not made any decision yet on the dealers’ margin but there is a pending request for an increase (which we may consider)," he said.

Pelayo said that after the Sept. 11 terrorist attacks on the US, the insurance premium of the company increased to as much as 30 to 50 percent.

Although he declined to give figures, Pelayo said the freight costs have also climbed after the US attacks.

Reacting to Consumers Oil Price Watch chairman Raul T. Concepcion’s assumption that the price rollback in November

should bea t P1.32 per liter, Pelayo said Concepcion failed to consider the three important factors.

"I think it would be below P1.32 because we have to factor in the increases in insurance premiums, freight cost and dealers’ margin not only the crude prices and the local exchange rate," Pelayo said.

Concepcion had based his assumption on the possibility that the Dubai crude would average $20.50 per barrel and the peso at P51.80 to a dollar by end-October. "I have drawn this rollback figure based on a worst case scenario. So if the price of crude will not reach $20.50 and the peso will not be at P51.80 to a dollar, then the price reduction would be higher than P1.32," he said.

Concepcion said the oil price rollback may trigger a possible reduction in transportation fares and freight costs.

Concepcion said the three major oil companies might opt to divide the projected price rollback in four equal weekly price reductions of about 33 centavos per liter starting Oct. 28 or next week, or a one time rollback of P1.32 in the second week of November.

Oil companies usually have a month-lag in adjusting their prices since their pricing is based on monthly inventory. They normally announce price adjustment every third week of the next month.

But this practice was modified when Energy Secretary Vincent Perez appealed to the oil firms to carry out price adjustments on a staggered basis to cushion the impact on the consuming public.

Pilipinas Shell Petroluem Corp. country chairman Oscar Reyes for his part, said it is still premature to make any decision since the month of October is not yet over.

"It depends on crude (prices). If crude continues to stay at current levels, we will see," Reyes said, when asked if another rollback in November is possible.

Caltex Philippines Inc. said it is still monitoring the market before making any comment on the price reduction next month.