RP oil industry remains an oligopoly — Concepcion

Industrialist and consumer advocate Raul T. Concepcion reiterated yesterday that the local oil industry remains an "oligopoly" despite its deregulation in 1998.

Concepcion, chairman of the Consumer and Oil Price Watch (COPW), in his letter to House Committee on Trade and Industry chairman Rep. Junie Cua, said "the industry is dominated by four players controlling 85 percent of the market."

"In a highly-competitive market, cost increases do not necessarily translate to increase in prices, as evidenced by many industries, distribution and trading companies who absorb the costs and thus affect their profitability because competition will not allow them to. However, in the case of the oil industry where there are few players, the situation is the reverse," he said.

Before the oil industry was deregulated in 1998, it was controlled by three major oil firms – Petron, Shell and Caltex. Upon deregulation, a number of new small oil firms entered the market pouring in an additional P23-billion equity in the industry.

Concepcion noted that the price increase in diesel for March oil refiners Petron Corp. and Pilipinas Shell Petroleum Corp., should only be 42 percent of the increase of the new oil players.

"They (refiners) import 70-percent Dubai crude and blend it with 30-percent imported MOPS (Mean of Platts Singapore) diesel from the region while the new players import 100 percent of their requirement," he said.

Concepcion said he still does not understand why his computations of the oil price adjustments do not reconcile with that of the oil firms even though they use the same pricing methodology.

"For the record, the Department of Energy (DOE), the oil industry, and the COPW use the same benchmark in determining the oil price changes Dubai crude and MOPS regional pricing for diesel and gasoline. This is established at the end of the month and is compared with the previous month to establish price changes upward or downward for the current month," he said.

Using his own computation, Concepcion disputed the oil firms’ claim that they need to recoup more than P2 per liter in under-recoveries.

Over the weekend, the oil firms except Petron, which has yet to officially announce a price adjustment have raised the price of their petroleum products by another 50 centavos per liter. The oil firms have been increasing the prices of their pump products for three consecutive weeks now.

COPW has been urging the oil firms to give more discounts on diesel which is being used by most public transport groups.

Concepcion said the public transport groups, whom he met last week, threatened to file a P2 fare hike if the oil companies will not give in to their request for additional discount on diesel.

Energy Secretary Vincent S. Perez, on the other hand, appealed to the oil companies to expand the number of gasoline stations giving discounts on diesel. At present, there are only 250 stations providing P1 per liter discounts on diesel products. There are more than 3,000 gasoline retail stations all over the country.