DOE to study new pricing benchmark of oil refiners

The Department of Energy (DOE) will study the proposal of oil refiners Petron Corp. and Pilipinas Shell Petroleum Corp. to shift their pricing mechanism to the Mean of Platts-Singapore (MOPS) from the Dubai crude benchmark.

Energy Undersecretary J.V. Emmanuel de Dios said while the two refiners import oil products using both Dubai crude and MOPS, with this, the reality is that they should use two different benchmarks."

De Dios pointed out that as part of their monitoring, the department will always consider using these two pricing benchmarks.

"If they are purchasing both crude and finished products, we do not see any reason why they should use only one pricing standard," he added.

But De Dios admitted that the DOE has not been informed about this move.

"We still have to ask and consult them if they really have plans to shift from Dubai crude to MOPS. We should know their position on this. This is just for the purpose of monitoring because under a free market, we cannot mandate them," he said.

The energy official, though, said that under a deregulated environment, consumers expect nothing than transparency from the industry players.

"They should be able to come up with a very good reason to justify where they get the prices of their products," de Dios said.

Earlier, Consumer and Oil Price Watch chairman Raul T. Concepcion said that the two oil refiners have indicated plans of using MOPS as benchmark in pricing their products instead of Dubai crude.

Concepcion warned that this move will push oil prices up as the movement of MOPS is more volatile than Dubai crude, which normally has a one-month lag time before its price moves.

Petron’s public affairs manager Virginia Ruivivar said since more than 10 percent of their products are being imported, they can’t help but use MOPS. "MOPS is also a reasonable benchmark for the industry since we have to import some of our requirements from the region."

Shell external affairs general manager Roberto Kanapi, on the other hand, said they had suggested the use of MOPS as "reference" in pricing their products and not for any major calculation or benchmark for establishing local prices.

"What we are saying is that MOPS reflects the true cost of finished products since we are importing 30 to 40 percent of our diesel products, we can use MOPS as reference. This is just a suggestion since most of the industry players are using MOPS, we might as well use it for uniformity," Kanapi said.

Kanapi clarified though that the use of MOPS as reference does not mean that Shell will eventually be shutting down its refinery in the Philippines. "Using MOPS and the study of closing down our refinery is not related. The study on refinery is for economics and measure of profitability while using MOPS is just one way of making a uniform reference," he said.