BY:DONALD SEVILLA
LET’S DO THE MATH
This is not a rant but a declaration of anger at how things are being run and managed by those whom we entrusted to look after our welfare.
The weekly fuel price hikes are more than unreasonable and defy the normal conventions of responsible and fair business practices . The lack of transparency of the mechanisms in place lead to more questions, doubts and suspicion.
Before the bombs started dropping on Iran five weeks ago, our fuel pump prices stood at these average levels- gasoline at P 55 / ltr., diesel at P60/ ltr.
For purposes of our discussion let us focus primarily on diesel to gain a much better understanding of how drastically the system works against us.
While we cannot dispute the fact that the Middle East conflict has created tensions in the Gulf that impact the world’s fuel supply, 20% of global oil is sourced from the region, is it reason enough to justify the ever spiraling increases especially the now double digit spikes in our local pump prices?
When the war with Iran started, Philippine authorities were quick to point out that there was no need to panic as we have enough fuel inventory to last us for an average of 50 days.
Take note we are yet on the 38th day of the war in Iran and assuming the claims stated are true and without any replacement to our stockpiles we still would have 12 days of inventory left at old purchase cost.
Yet since then we have endured five rounds of price increases that percentage- wise does not add up vis-a-vis the average percentage increase of the traded crude benchmark.
A barrel of crude at the start of the conflict traded at an average of US$77/ bbl. At today’s prices average trading is at US$111/bbl. reflecting a percentage increase of around 44%.
For purposes of conservative computation with all other oil benchmarks considered such as Brent, Dubai, WTI (West Texas Intermediate) and others, let us say from then till now we have seen an average 60% increase in raw material cost.
Yet comparing it to our Philippine pump prices for diesel which as of today has skyrocketed to around Php 153. 50/ ltr. (Caltex) we are seeing a percentage increase of 155.83% from the Php60 levels at the war’s start.
No wonder we ranked among the highest in the world if not the highest in percentage increases at the fuel pump, not a feat to be proud of.
We are just about the first and perhaps the only country to have declared a state of energy emergency which reflects a lot of our preparedness and weak government policies in place to address such issues.
Many countries like us are heavily dependent on imports too for their oil needs not having any domestic production. But are their consumers heavily hit as us?
Nope. Their governments were quick to act and step in. Even South Korea who has a lot of big refineries that supply our Asian region was quick to put a cap to temper the impact of oil price hikes.
But here, we have been busy squabbling over the impeachment of the Vice President, politicizing and debating the wisdom of temporarily suspending the VAT and excise taxes on fuel products while the average Filipino no longer knows what to do and where to go.
Our lawmakers are worried about the estimated Php320B in taxes lost while looking away at the trillion pesos gone to flood control corruption and other anomalies. Wherein do our hearts lie for public service?
Juan de la Cruz has suffered way more than enough. What more do our leaders want from us? To tighten our belts more and starve ourselves to death?
Yet going back to the math, our country consumes an average of 33 million liters of diesel per day. Assuming all data we were provided are correct, 12 remaining days of our 50 day inventory would translate to approximately 396,000,000 liters at average 33M ltrs/ day. From a pre-war price of Php 60 / ltr to the present Php153. 50/ ltr at today’s pump price, we are looking at a difference of Php93 50/ ltr. or a windfall profit of Php 37,026,000,000,
Please take note that at Php60/ ltr. levels, the oil players already earned a profit. What about for other petroleum products? Here we are only looking at diesel as we have pointed out from the, start.
No wonder looking at these figures, diesel is much more expensive and attractive business than gasoline in the Philippines. Of course industry experts and those who have benefited from the whole mechanism will downplay these assessments and dispute them.
But how did PETRON our sole refinery manage to earn Php15B in net profits last year as reported in their SEC filings? So did Shell and perhaps others.
When government lay in bed with the oil industry players and agreed to a “replacement cost pricing” mechanism it practically surrendered its oversight.
The problem is that the mechanism put in place lacks of transparency as to how things are computed and what prices are arrived at. While oil is a heavily traded commodity and MOPS figures are publicly available, according to the DOE the MOPS prevents disclosures of the actual contract price, making their hands more tied.
Is this so? What’s puzzling is why have we allowed ourselves to be cooked in our own lard ( ginisa sa sariling mantika)? Is government totally helpless?
Are we to believe that in this time of crisis nobody, no entity is laughing their way to the bank at our people’s expense? We can start from the bottom and work our way up the supply chain to see If our math was relevant.
Why would some enterprising individuals have storage for diesel far greater than their own needs? Only the small guys get caught but the big players as usual are smiling, watching their bank accounts fatten by the day!
P. S. Gov’t. should consider taxing the gross income these oil players make based on their purchase cost before taking into account new inventory cost and other expenses that could hide actual earnings in corporate filings to makeup for the projected shortfall in revenue when VAT and excise taxes on petroleum products are suspended.
References: DOE. gov.ph
Articles fr: MB, Rappler
Mean of Platts Singapore (MOPS)
Platts Oil Market Forums
DISCLAIMER: I do not claim to be an expert in the complexities of the oil trade but thus far, basic facts and logical assumptions can be deduced from extensive research and assessment of available data from reliable sources. Most we read are articles and reports explaining and justifying why we have high oil prices in our country. Yet it does not make us unique and if we start digging deeper we are led to ask more questions. I look forward that this article be an eye opener for everyone to ask more, demand more transparency and accountability and prod our govt officials to do their jobs at protecting the interests of our people We should urge our lawmakers to review/ repeal the, OIL DEREGULATION LAW and install safeguards to protect the public interest