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No
reason to hike oil prices
Oil Products Overpriced by P0.16/Liter
There
is no basis in the plan of oil firms to again hike the prices of their petroleum
products in spite of the uptrend in world oil prices. Oil companies in the
country have overpriced their products by around 16 centavos per liter from
January to May this year.
By
IBON Foundation
Posted by Bulatlat.com
There
is no basis in the plan of oil firms to again hike the prices of their petroleum
products in spite of the uptrend in world oil prices.
Oil companies in the country have overpriced their products by around 16
centavos per liter from January to May this year. Consequently, oil firms earned
extra profits of more than P216 million during the said period, of which P194
million went to Petron Corporation, Pilipinas Shell, and Caltex Philippines.
The overpricing estimates are computed using the rule of thumb based on the
movement of Dubai crude price and the peso-US dollar exchange rate. In the first
five months of the year, the price of Dubai crude has moved from US$28.87 per
barrel in January to US$34.74 last month. On the other hand, the value of the
peso against the US dollar weakened from P55.55 to P55.83 during the same
period.
Oil companies and the Department of Energy (DoE) dismiss IBON’s estimates as
“outdated,” arguing that there are other factors that affect pump prices
under a deregulated environment. But when asked to reveal their own computation
or formula, the DoE and the oil firms say it is not for “public
consumption.”
Moreover, the profiteering estimates of IBON presuppose that petroleum in the
world market is justly priced, which is not the case.
IBON estimates show that posted world oil prices (which supposedly represent
exploration and production costs, and the royalties paid to oil producing
countries) are actually bloated.
Crude oil production in the Organization of Petroleum Exporting Countries (OPEC)
only costs between US$7-8 per barrel. On the other hand, based on their 2003
financial reports, Chevron Texaco (which owns Caltex Philippines) spends US$3
per barrel for exploration, and Royal Dutch Shell (which controls Pilipinas
Shell), almost US$4 per barrel.
Moreover, according to the US-based Energy Information Administration (EIA),
royalties cost around 14% of the posted price. Using the latest Dubai crude
(US$34.74 per barrel as of May 2004) as reference, oil producing countries get
about US$5 per barrel in royalties.
This means that exploration and production costs plus the royalties range from
US$15-17 per barrel, or a difference of US$18-20 per barrel from the latest
price of Dubai crude.
The difference between the posted price and the estimated total cost of
producing crude oil represents windfall profits for the oil companies.
That crude oil and petroleum products are overpriced belies the claim of oil
firms that they have to adjust their pump prices to reflect the uptrend in world
crude oil prices.
Recently, oil companies implemented a P1 per liter hike in the pump prices of
gasoline, diesel, and kerosene. Such increase represents the single highest
increase in petroleum prices since October 2001 when the average retail price
went up by P1.20 per liter. It was followed by a P1 per kilogram hike in the
prices of liquefied petroleum gas (LPG).
For the record, it is the seventh round of oil price hikes for the year and the
61st since the downstream oil industry was deregulated in April 1996. The
unbridled oil price increases plus the price manipulation practiced by big oil
companies and its impact on the economy and the people should force government
to restudy its deregulation policy and consider at least controlling oil price
movement. Posted by Bulatlat.com
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