A Shell, Petron, et. al. in collusion?

Finally, the big oil companies led by Shell and Petron buckled to public pressure and reduced pump prices by P2 per liter last weekend. Pronouncements from their spokespersons indicate the possibility of more reductions in the coming weeks.

Before this last announcement, despite the significant drop in crude oil prices in the world market, the oil companies were just giving the consuming public relief in trickles of fifty centavos per liter every week.

This prompted consumer and transport groups to mount protests, and as their voices grew louder, Energy Secretary Angelo Reyes announced to the media that he would call the oil companies’ officials to explain their failure to immediately reduce the cost of petroleum products.

Apparently, as a result of this DOE action, the big oil companies followed their smaller competitors and effected the biggest drop in pump prices to date.

Legislators not happy

The latest moves of the big oil companies, however, did not amuse some legislators. A local daily (not Philippine Star) quoted Senator Francis “Kiko” Pangilinan as saying that the three biggest oil companies, Shell, Petron and Chevron (formerly Caltex) are at the height of “insensitivity and arrogance.”

This was the senator’s reaction to the reports that the big companies did not feel threatened by the calls of consumer and transport groups to boycott them.

What also got the goat of Senator Pangilinan was the report that an executive of one of the big oil companies revealed that it was normal practice among the players in the industry to discuss and reach a consensus before any of these players initiate changes in prices, up or down. Wow! Isn’t this collusion? Or price fixing? Or price manipulation?

According to corridor talks in the DOE, this executive was apparently irked when pressed why the big companies did not follow the smaller ones in reducing prices. He reportedly blurted out that there was a sort of “betrayal” by the small players because the big oil companies were not informed of the decision to roll back prices early last week.

In the newspaper report, Senator Pangilinan as further quoted as saying, “The executive who said this should be fired because his statement just proves that all of them are conniving to dupe us.”

The question now is who will take the lead in investigating this oil company executive’s statement in order to determine whether the major oil companies are indeed conniving to manipulate prices of oil products. The Department of Energy?

No real competition

On his part, Congressman Danilo E. Suarez of Quezon, is raising the question why the reduction in prices are the same for all companies, particularly the major oil companies. “They have different sources of supply, different modes of transport and distribution, different operating costs, yet the price reductions they implement are the same, either fifty centavos or P2 per liter,” Congressman Suarez remarked.

“This clearly shows the majors are protecting each other’s profit levels. No one would like to break rank. No one wants to cut into one another’s market share. So there is no real competition here,” concludes Suarez. The congressman intimated that he is seriously assessing the possibility of amending the Oil Deregulation Law.

Record profits as crude prices soared

Even as Sec. Reyes ruled out the DOE’s support to an amendment of the law, reports of double-digit increases in the oil industry members’ profits at the time when consumers are reeling from the price increases are raising concerns of price gouging and unreasonable profiteering.

Cebu Rep. Eduardo Gullas has been one of those diligently tracking the earnings not just of the majors but also of the independent oil companies. In one of his earlier statements, he declared that the country’s two biggest oil firms – Pilipinas Shell and Petron – netted nearly P70 billion in cumulative net profits in the first 10 years of oil deregulation.

The two oil refiners, it appears, realized the bulk of their net profits over the last three years, as they enjoyed massive powers to command pump prices as result of highly volatile crude oil prices that had seen record highs in recent months. Only Petron and Shell maintain refineries in the country.

At least Petron, which is publicly listed, is able to share its bounty with local stockholders and the government, which holds 40 percent of the company’s equity.

Shell, on the other hand, has managed to elude the deregulation law’s decade-old provision calling for crude oil refining firms to list their companies in the local bourse. Thus, only its foreign-based shareholders get the bulk of the benefits from oil’s price volatility.

Call for more transparency and review of oil deregulation

Ibon Foundation is joining the call for more transparency in the conduct of the oil companies’ businesses. In particular, there is growing clamor to strengthen mechanisms that would catch acts of collusion among members of the oil industry when setting prices.

Ten years of waiting for the full benefit of the oil deregulation law continues to elude our countrymen. If the law is being abused by any of the parties involved, then the law should be reviewed and evaluated considering experiences during the past decade and in the light of prevailing conditions.

Collegiate Champions League update

Xavier University Crusaders swept competitions in the recently concluded Cagayan de Oro Schools Athletic Association (COSAA) to capture the league’s 2008 championship and gain the right to represent Region 7 in the ongoing SMART-PLDT Philippine Collegiate Championship games.

The Crusaders dominated the COSAA tournament that included runner-up Capitol University Stallions, Cagayan de Oro College Scorpions, STI Olympians, Lourdes College Bluesash and Southern de Oro Philippines College Sharks.

Next stop for the Xavier University Crusaders is the Zone 4 championship where it will compete with the Region 8 and 9 champions teams, the UAAP 3rd placer, the CESAFI third-placer and a wild card entry.

In Region 5 (Dumaguete/Bohol), four teams will battle for the regional championship. These are Bohol champion BIT International College Cruisers, Bohol runner-up Holy Name University Falcons, Dumaguete champion Foundation University Greyhounds, and Dumaguete runner-up Asian College of Science & Technology Lightnings.

The Region 5 champion team will advance to the Zone 3 championship to meet champion teams from Region 4 and 5, the NCAA third placer, the CESAFI runner-up and a wild card entry.

For more details about the biggest collegiate basketball event for the year sponsored by SMART and PLDT, visit the official website, www.CollegiateChampionsLeague.net.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.