P1 oil price cut likely next month

There is a "good possibi-lity" that fuel prices will be reduced by P1 per liter next month, Energy Secretary Mario Tiaoqui said yesterday.

Tiaoqui issued the statement following the significant drop in world prices of crude oil with Dubai crude, the Philippine benchmark, falling from a high of $31 to only $19 per barrel.

"We might even see a bigger price drop. But we still have to talk about that because we want to know what (the oil firms’) plans are," he said in a radio interview.

Tiaoqui said he will meet with other energy officials to discuss the issue.

He expressed hope that a meeting with oil executives would lead to "good news" for the country at the start of the year.

"We are working out the meetings. Many of the executives are out on extended vacation so we are firming up the details of the meeting," he said.

If government plans push through, it will be the first time for oil companies to roll back their prices after a spate of increases that were blamed on rising world oil prices and the depreciating peso.

But oil companies are now saying that the drop in world oil prices is not enough for them to recover from losses such as their working capital costs, interest rates and other financial considerations.

Malacañang believes there should be no additional oil price increase because the price of imported crude oil, according to their expectations, seems to be stabilizing.

Executive Secretary Ronaldo Zamora has repeatedly said that if the price of imported crude oil goes down, oil companies should reduce their prices as quickly as they raised their prices.

Otherwise, Zamora said, the oil companies would unwittingly push the long-standing clamor from various quarters for a possible congressional review of the Oil Deregulation Law, which allowed oil companies to freely adjust their prices without prior government approval.

The local oil industry was deregulated in 1998 in an effort to encourage competition in the industry and the entry of new oil companies which was then thought to encourage lower oil prices.

The deregulation law caused the industry to grow from only three players – dominated by the so-called "Big 3": Caltex, Petron and Shell – to 60 competitors.

But consumers, who expected oil prices to drop as soon as new players entered the market, were disappointed not only in the absence of price rollbacks but by the continued rise in gasoline prices.

Industry leaders had explored the possibility of adjusting pump prices either weekly or bi-weekly so that consumers would not have to absorb too dramatic price increases as is done in Thailand.

Energy officials say that in Thailand, oil prices are adjusted daily while there are several price adjustments in a single day in Australia.

Local petroleum prices remain low compared to other Asian countries. Premium gasoline in Thailand, for example, is P1.55 higher than here.