Pump prices up anew as world oil prices soar

Local pump prices went up anew yesterday by 30 centavos per liter, the eighth oil price hike since the beginning of the year as oil companies said they are finding it difficult to keep up with the soaring prices of crude oil in the world market.

The oil price adjustments were led by the smaller players in the industry under the Independent Philippine Petroleum Companies Association (IPPCA).

UniOil increased its prices yesterday by 30 centavos per liter on all products. Other companies announced they will follow suit with a 35 centavo per liter hike this week as world oil prices hit another all-time high of $46.65 per barrel Friday last week.

IPPCA members said they had to raise pump prices to prevent further losses in the wake of the continued increases in the prices of crude oil and refined petroleum products in the global market.

"We could no longer hold down the rising prices on finished petroleum products, particularly diesel and gasoline. The need for survival demands that we have to adjust our prices to reflect world prices," said IPPCA president Chito Villavicencio whose company operates Flying V retail gas stations.

Villavicencio said a price increase was already overdue since the independent oil importers have been incurring under-recoveries in diesel fuel since January 2002 and are only making small margins on gasoline.

IPPCA said that as of Aug. 13, the landed cost of gasoline sold in the domestic market reached an all-time high of P24.60 per liter. This is sold wholesale to dealers at P24.92 which translates to a minimal margin of only 32 centavos per liter.

The landed cost of diesel, meanwhile, is P21.54 per liter but industry players sell this to their dealers at only P19.51 a liter. This results in losses of P2.03 per liter."The fact that we have been absorbing losses on diesel fuel and keep tiny margins on gasoline under a deregulated era process, there is no overcharging in the oil industry," IPPCA vice president and SeaOil president Glenn Yu said.

The IPPCA said prices of petroleum products in the country remain one of the lowest across the globe.

The P27.59 per liter price of unleaded gasoline, it cited, is the second lowest in a lost of nine economies the IPPCA studied.

Thailand has the cheapest unleaded gasoline at an equivalent price of P26.94 per liter, but the price difference in comparison to landed cost is subsidized by the Thai government.

The price of diesel is also the second lowest in the country at P20.23 per liter to Thailand’s P19.66 although the industry does not enjoy any subsidy from the government.

Villavicencio also refuted accusations by the Consumer and Oil Price Watch (COPW) that oil companies were overcharging.

"COPW has issued statements that were misleading and with no firm bases in fact. It reported that petroleum prices went down for diesel, from $44.62 per barrel last May to $42.842 per barrel last June for which a rollback in pump prices should have been done. But the COPW failed to appreciate the substantial under-recovery of P1.741 per liter for diesel that we have been incurring. Diesel prices rose to 215 percent since January 2002. The peso depreciated by 9 percent while our wholesale posted prices increased by only 158 percent for the same period," said Villavicencio.

Energy Secretary Vincent Perez called on oil companies to temper the adjustments in pump prices.

"We note the oil companies’ continued cooperation and sensitivity in the midst of soaring global oil prices the past months. But we are still making an appeal to them to reduce the level of price adjustment they have implemented, from 35 centavos per liter to only 30 centavos, to soften its impact to the public," Perez said in a statement.

World oil prices surged to all-time highs last Friday due to worries of fresh sabotage in Iraq and possible supply disruptions in Venezuela, where President Hugo Chavez faces a referendum. OPEC, which controls half of the world’s oil exports, has also been unable to arrest rising prices despite increasing its production.

Dubai crude peaked to another record of $38.90 per barrel on Aug. 13, posting an average of $37.88 for this month from $34.65 a month ago, up by $3.23.

Unleaded gasoline jumped to $52.25 per barrel spot price. Month to date average is now $51.09 per barrel from $46.52 in July. Diesel, on the other hand, increased to $46.25 from $50.58, up by $4.33.

The Energy Department in cooperation with the COPW has been urging oil companies to help mitigate the effects of any price increases to the consumers. Secretary Perez and COPW have called on the oil companies to implement frequent but smaller adjustments.

Martinez said that the cost of added fuel to industries is minuscule and the government should instead focus on talking to sectors that take advantage of the situation.

"For instance, a delivery truck of a sardine company with products worth P300,000 only pays P2,500 for its transport expenses. In most manufacturing sectors, the effect of a hike in pump prices should be no more than one percent in additional expenses," said Martinez.