Computing oil prices - a trade secret?

A local think-tank, IBON Foundation, bewails the lack of transparency among major oil players (Petron, Caltex and Shell) in computing the prices of their products in the face of declining fuel prices in world market. There is a reason for this accusation. Lately, these companies cut back the pump prices of petroleum products by a few pesos, but whether or not the reduction was justifiable is subject to speculation. A few months ago when fuel cost more than $130 per barrel, a series of escalation was slapped to consumers, reaching as high as P62 per liter (for top quality gasoline). Again, whether or not the amount of increase was fair and justifiable was open to question.

These questions arise because these companies have refused to disclose to the public vital information relative to the financial components of their operations. According to IBON, information on the following has been kept under wraps: "Retail pricing formulas and strategies as these companies relate to their foreign mother corporations; their overseas supply sources and the terms and periods of their supply contracts; any payments local firms make to their mother firms whether as profit shares, charges for technologies or service fees and other payments; refinery stocks and capacity; local sales and distribution to direct buyers, retailers and other oil firms."

Although some of these information have been made public, IBON said, still other critical data have been withheld for the reason that these are "confidential". With inadequate information about these transactions how can consumers and the general public know whether oil has been reasonably priced in this country?

Under the oil deregulation law (R.A. 8479), the DOE is tasked to monitor the operation of oil players. Among others, the agency is mandated to "maintain a periodic schedule of present and future total industry inventory of petroleum products for the purpose of determining the level of supply." For their part oil companies are required to submit to DOE regular reports on their operations including financial transactions. In fact, failure to submit such reports or other reports is penalized under this law with imprisonment or fine on the part of the responsible personnel.

It is very possible that the big oil industry players and the smaller ones have been submitting their reports to DOE and other agencies (DOJ and DTI). But whether these are carefully studied and analyzed as to their reliability and correctness nobody knows. It is possible too that the people in these agencies are just taking these reports at their face value, cautious perhaps of keeping themselves in the good graces of the oil conglomerates, which have millions for PR works.

Such kid-glove treatment of the oil players is evident in the failure of DOE and other agencies to raise the question of whether or not the current prices of oil products are justifiable and fair considering market forces. These offices, which are supposed to play a lead role in protecting the interest of the general public, seem afraid to "rock the boat" for reasons of their own.

It's true that presently there's a move to conduct an audit on the books of local companies. But this is taken only in answer to the ongoing clamor of certain groups - the militant ones, especially - but not out of the government's concern to protect the people's interest.

One provision of R.A. 8479 mandates the DOE and DTI to "take all measures to promote free trade and prevent cartelization, monopolies, combinations, in restraint of trade, and any unfair competition…" The idea is to encourage competition which usually results in improved services and lower cost of fossil fuel. But this has not happened and the three major oil companies with their billions of resources have controlled and dominated the local market to the prejudice of small players. Cartelization? Yet bet these companies have been operating like one. Have you not noticed that in almost all corporate moves they always act in concord? In fact, in determining the rates of increase and cut backs their figures are almost always point-blank the same. And of course, they always say in chorus that their roll-back is only so and so because they have not yet recovered their losses. And of course too, the government always says amen. Because it is not serious enough to study the situation and has not gotten hold of authentic data, what else can it do?

Now DOE and DOJ authorities say they will audit the oil firms' books. Sure they will, but only the most naïve will expect something out of it. It's all "kunwari lang," as Tagalogs say.

* * *

Email: [email protected]