Pump prices up 50 cent per liter

MANILA, Philippines – Oil firms raised pump prices by 50 centavos per liter effective yesterday despite the 50-centavo tariff cut, citing the “significant” rise in global crude prices.

Pilipinas Shell Petroleum Corp. external affairs general manager Roberto Kanapi attributed the price adjustment to the “significant increase in world oil prices.”

“(It is) due to cost pressure,” Chevron Philippines, for its part, said in its announcement late Friday night.

Petron Corp. and Total Petroleum made price adjustments effective 6 a.m. today.

Independent Philip-pine Petroleum Companies
Association (IPPCA) chairman Fernando Martinez earlier said the lower tariff cut is not enough to absorb the impact of the recent increases in global crude prices.

“Tariff cut actually is only one percent now instead of two percent, so in effect it would result in 25 centavos hike in taxes,” Martinez said.

The Department of Energy (DOE) earlier certified a one percent reduction in tariff, which translated to 50 centavos per liter drop in pump prices. The two percent tariff cut implemented on Feb.1 translated to P1 per liter drop in diesel prices.

Martinez, who is also chairman of Eastern Petroleum Corp., said that the lower cut in tariff plus the $4 hike in Dubai crude entailed P1.25 per liter additional cost.

“So the P1.50 rollback given last Feb. 1 may partly be recovered up to P1 per liter,” he said.

Given this computation, the oil firms will still have an under-recovery of 50 centavos per liter, thus the need to further raise pump prices.

Last week, Energy Secretary Angelo Reyes said he had certified last Feb. 18 the lowering of tariff on imported petroleum products from three percent to two percent.

The Bureau of Customs will use the DOE certification as basis for setting the tariff cut for March.

The government has approved periodic tariff cuts to cushion the impact of the steady rise in global crude prices. The DOE reviews the tariff reduction every month.

DOE has set the trigger point for the three to two percent tariff reduction at $83 per barrel for Dubai and $105 for MOPS (Mean of Platts) diesel. The figures include freight and insurance costs.

The trigger for two percent to one percent reduction is at $92 per barrel for Dubai and $110 for MOPS-diesel.

For zero tariff, the trigger mechanism is set at $103 per barrel for Dubai and $115 per barrel for MOPS-diesel.

Based on the DOE monitoring, the month-to-date average price of Asian Dubai crude is $2 per barrel higher than the January average.  Likewise, gasoline and diesel averages are $3/bbl and $4/bbl higher than the previous month’s levels.

Oil price levels have always been vulnerable to supply side shocks and political tensions, particularly in oil producing countries. 

Fears of production cut by the Organization of Petroleum Exporting Countries ahead of the cartel’s meeting next week have pushed prices to record levels.

OPEC president Chakib Khelil earlier said the current supply is sufficient and that consumption is likely to drop in the next six months. He said OPEC sees no reason to increase production, but he stressed the issue will ultimately be decided in the meeting.

Week-on-week average prices of Dubai crude, gasoline and diesel rose by $3/bbl, $5/bbl $7/bbl, respectively.

The political unrest in Nigeria, Africa’s biggest oil producer, and Turkey’s offensive in Northern Iraq have contributed to the latest spikes in crude costs in the international market.