Oil firms accused of overpricing

Oil companies may have been overpricing their products amid the spate of pump price increases over the past two weeks, businessman and consumer advocate Raul T. Concepcion claimed yesterday.

In a press briefing, the chairman of the Consumer Oil and Price Watch (COPW) said based on their data, oil firms — mostly the smaller players – still have an over-recovery for gasoline.

Concepcion said the recent claim of the Independent Philippine Petroleum Companies Association (IPPCA) that they still have an under-recovery of 78 centavos per liter for gasoline was not in accordance with their pricing benchmark.

He added that IPPCA’s P3.81 per liter under-recovery for diesel is likewise not consistent with the two benchmarks – Dubai crude and the Mean of Platts Singapore (MOPS).

Major oil refiners Petron Corp. and Pilipinas Shell Petroleum Corp. use Dubai crude as basis in pricing their products while the small, independent players adopt MOPS as their price benchmark.

Under a deregulated environment which started in 1998, petroleum pump prices are now being determined and dictated by the market, based on competitive pressures.

Concepcion thus urged the oil firms, particularly the small oil players, to be more transparent in the pricing of petroleum products in the wake of soaring world crude prices.

"The consumer has the right to know whether the price he is paying is fair, notwithstanding that the oil industry has been deregulated," he said.

He pointed out that it is IPPCA’s responsibility to explain to the consuming public why they are claiming only now, when global oil prices are on the rise, their under-recoveries since January 2002

"Our sole intent is to communicate to the public the basis for the price increases or rollback and not place the industry in a bad light," he said.

Concepcion said the difference in the computation of domestic oil prices between the oil refiners and the small oil players was largely due to market competition.

"Free market competition is working and therefore, the COPW should not be blamed for making irresponsible statements," he said.

Concepcion said due to the volatility of oil prices, the COPW will issue a weekly update on the movement of Dubai crude and MOPS and inform the public on the reasonable level of price increases.

Early last week, IPPCA chided Concepcion for publicly declaring that there will be no price increases in petroleum products until end-August. Since then, global crude prices shot to record-highs of over $44 per barrel, leading to a similar hike in local pump prices.

"Press statements recently released by COPW regarding expected oil price movements in the months of July and August are clearly misleading," IPPCA executive director Hector Fajardo said.

Fajardo said "by setting false expectations, the COPW with its irresponsible comments put the entire oil industry in a bad light and may cause unrest in consumers who expect no price movements during a time where upward price movements are sure to take place."

IPPCA is a group of 12 companies engaged in the importation, trading and retailing of fuel and other petroleum products.