Oil firms mull reducing pump prices by P2 this weekend

Oil companies are planning to reduce their pump prices by an average of P2 per liter this weekend.

The projected rollback is way below the P9 to P10 per liter price cut that sectors claim should be implemented.

Flying V chairman Ramon Villavicencio, who was brave enough to reveal his price forecast at the stakeholders’ meeting called by the Department of Energy (DOE), told reporters that based on their computation, they could adjust their gasoline prices by P3 per liter and P1 per liter for diesel or an average of P2 per liter.

Villavicencio, however, pointed out that this will depend on the market forces and they will decide later this week what level of price cut they would implement. 

National Economic and Development Authority (NEDA) director general Ralph Recto and Sen. Mar Roxas earlier claimed that the oil firms have been overcharging consumers by P9 to P10 per liter, taking into account the drop in international crude prices.

Shell and Petron Corp. opted to be on the safe side, saying they would just respond to competitive pressures.

“Now in the case of whether there is a rollback, first of all, we cannot discuss pricing in a group or when other oil companies are here. Secondly, I can only say that we will only react to competition as and when required. So if computation calls for a rollback then we will roll back,” said Shell country chairman Edgar Chua.

Petron chairman Nicasio Alcantara, on the other hand, said they could not initiate any moves to reduce prices as “their losses are already huge.”

The oil companies, during the same meeting, argued that the computation of Roxas “is wrong and without basis.”

“We have been saying numerous times that the computation being circulated by these people is wrong. If they are using wrong computation then their conclusion is also wrong,” said Independent Petroleum Philippine Companies Association (IPPCA) chairman and Eastern Petroleum Corp. chairman Fernando Martinez.

Martinez said these individuals should not make “undue speculations” which create “undue expectations.”

“They should be able to look and analyze all the aspects of oil trading,” he said.

Chua, meanwhile, echoed Martinez’s sentiment, saying “the pricing fundamentals consist mainly of product cost and foreign exchange, but the ultimate determinant of prices is market competition/forces as the oil industry in the Philippines is deregulated.”

“We’re prepared to show where the error lies. It did not take into account the 30-day cost and it does not take into account the other costs once the product has landed in the country,” Chua said.

The Shell executive said, “We believe we can easily demonstrate why the computation is not correct.”

Chua also warned that “if Congress wants to amend the deregulation law, they should consider whether they would want for the country to simply become an importer of finished products or to have a sustainable petroleum refining industry.”

“Government policies and legislation must be supportive and incentives must be provided to make this possible,” he added.

On the issue of profiteering, the major oil firms also cried foul.

Alcantara earlier disclosed that the company may likely incur P2 billion in losses this year because of margin losses.

Chua said if it were not for the P3-billion one-time gain from the sale of Shell’s trademark, they are seeing a very slim income of P200 million by end-2008.

“Depending on what happens in pricing, maybe we will incur a maximum, excluding the special, we expect to have a profit of P200 million or none at all. The special will be taken from the economic rights of the trademark,” Chua said.

Chevron Philippines Inc. country chief Randy Johnson said they are seeing P1-billion losses this year.

“We are expecting to incur losses. But we estimate that we will lose P1 billion. When we were selling products at a loss, our volumes went way up and so we lost tremendously a lot of money in the first half. So it’s hard to recover that by the end of the year. Well, everybody is trying to save their cash, well, certainly we are. When you lose that much money you do what you can,” Johnson said.

On the issue of price difference between small and major oil players, Chua said, “When the global oil prices ‘crashed,’ the small oil companies were able to lead price rollbacks due to their small stock inventories and minimal under-recoveries, while oil majors had to deal with their higher priced inventories and significant under-recoveries.” – With Rainier Allan Ronda