Concepcion warns of oil price, transport fare hikes due to shift in price benchmark

The apparent move of oil refiners Pilipinas Shell Petroleum Corp. and Petron Corp. to shift their oil pricing benchmark from Dubai crude to Mean of Platts – Singapore (MOPS) retroactive January this year would likely lead to substantial oil price increases in the next few weeks, Consumer Oil and Price Watch (COPW) chairman Raul T. Concepcion said.

He said a transport fare increase would likewise be inevitable if the oil firms change their pricing mechanism since this would wipe out the supposed 30 centavos per liter oil price rollback on diesel products expected next month.

"This means that the oil price increase will be substantial as the two oil refineries will follow the pricing of the new players who import 100 percent of their requirements from the region," he said.

With this, Concepcion said he would appeal to both Shell and Petron to postpone the shift to MOPS on April when the MOPS price will be lower. "What I am requesting them is to use MOPS as benchmark on April and not retroactive January this year as they were saying. I also asked them that if they will use MOPS, they should use it forever and not use Dubai crude anymore," he said.

He explained that the MOPS is easily affected by many factors unlike Dubai, which a lag time before its impact can be felt in the local market. "MOPS is good if there are no external factors that will affect the prices. They should not shift from MOPS to Dubai only if they can make more profits from using one method from the other. In MOPS, any major reaction or factor can push prices up or down," he said.

Concepcion said he will be meeting with Energy Secretary Vincent S. Perez to discuss how they can work closely with the DOE on the industry’s shift to MOPS and the need to obtain the MOPS of gasoline and diesel on a daily basis.

As oil refiners, Shell and Petron are normally using Dubai crude as benchmark for pricing their local products as against the small oil players who use MOPS as they import 100 percent of their products from the region. Using Dubai crude takes oil refiners at least a month to adjust their prices while oil price adjustments using MOPS will take only about a week.

Using MOPS instead of Dubai will make the local oil pricing system more volatile since oil price adjustments will be done almost every one or two weeks. But the movement, energy officials say, will not necessarily mean an upward adjustment. "Prices could also go down which will allow the consumers to immediately benefit from the lowering of oil prices in the world market."

Due to the implementation of the Clean Air Act (CAA), all oil companies, including Shell and Petron, have to import finished products to comply with the law, thus, allowing them to use MOPS as part of their basis in pricing their products.