Fuel costs unbundled soon with DOE order

By Lenie Lectura- May 31, 2019
https://businessmirror.com.ph/2019/05/31/fuel-costs-unbundled-soon-with-doe-order/

A DIRECTIVE for oil companies to unbundle their fuel cost will take effect soon after Energy Secretary Alfonso Cusi signed last Tuesday a department circular on the Revised Guidelines for the Monitoring of Prices in the Sale of Petroleum Products by the Downstream Oil Industry in the Philippines.

DC 2019-05-8 states that for every price adjustment of petroleum products, oil companies must comply with the submission of the detailed computation with corresponding explanation and supporting documents on the reasons of the movement.

In particular, oil firms —which have been opposing the DOE move—must unbundle their fuel cost with the following details:

■ International content, which makes up import cost, freight cost, insurance and foreign-exchange rate.

■ Taxes and duties, which include excise tax, value-added tax, duties and other imports.


Biofuel cost

■ Oil company take components. Details on port charges, refining cost, storage cost, handling cost, marketing costs, transshipment cost, other cost, oil company profit margin and total oil company price are required to be turned over to the agency.

“Within two months after effectivity of this circular or whenever required by the DOE or by the DOE-Department of Justice [DOJ] Task Force, oil companies shall be required to submit a report to the OIMB [Oil Industry Management Bureau], on a per liter and per product basis for liquid fuel and automotive LPG and on a per kilogram basis for household LPG, containing the detailed computation with corresponding explanation and supporting documents on the unbundled items comprising the oil company price as of December 1, 2018,” it said.

The circular will take effect after 15 days from publication.

Cusi said these enhancements will provide the DOE and other relevant government agencies with the necessary data to formulate proactive and appropriate policy initiatives for the benefit of consumers and the downstream oil industry.

Furthermore, the data provided will support the DOE-DOJ Task Force investigations on reported incidents of anticompetitive behavior.

The DOE also wants oil companies to provide a weekly notice of the price adjustments—whether decrease, increase or no adjustment—not later than 3pm of the day before the implementation day.

For LPG, oil firms must notify the DOE not later than the end of every month for any price adjustment or no adjustment.

The DOE wants the price adjustment for liquid fuel implemented every Tuesday and every first day of the month for LPG.

“Rest assured that the utilization of the data collected will be subjected to the strict confidentiality requirements under the Downstream Oil Industry Deregulation Act, the Freedom Deregulation Act, and the Philippine Competition Commission laws,” said Cusi.

The release of the circular should have happened in June last year. However, the agency needed to conduct another round of focus group discussions with the stakeholders.


Oil firms protest

However, oil firms are opposed to this. In particular, they do not want to reveal the so-called industry take.

The Independent Philippine Petroleum Companies Association (Ippca) and The Philippine Institute of Petroleum (PIP) said the oil industry is a deregulated industry. They said that most of the key components of oil price are already public knowledge such as price of crude oil which is published by MOPS (Means of Platts Singapore), carriage price or vessel, insurance and dollar exchange rate are also easily determinable.

MOPS refers to the price of finished products such as gasoline and diesel that are sold in pumping stations nationwide.

“But there are some things which are proprietary to each oil company which they cannot divulge, the same being trade secrets. Divulging such would mean losing their advantage,” said Ippca President Bong Suntay.

Ippca has at least 16 members composed of the country’s leading independent oil players, such as Eastern Petroleum Corp., Unioil Petroleum Philippines Inc., Seaoil Philippines, Flying V, City Oil, Pryce Gases, and LPGMA, among others.

PIP Executive Director Teddy Reyes said almost 90 percent of pump price cost components are published and therefore transparent. “As such, information sought by the draft circular may be derived by the DOE without necessarily requiring players’ disclosure of commercially sensitive information. Too much transparency will discourage investing in the country,” said Reyes, adding that local and foreign investors would want a level playing field under a deregulation set up where it’s a market-driven competition.

The new policy is pursuant to DOE’s mandate under Republic Act 8479, or the Downstream Oil Industry Deregulation Act of 1998, to monitor both international and domestic price movements of petroleum products.

Consumer advocacy group Laban Konsyumer Inc. has also been pushing for transparency in retail prices of petroleum products as part of end-users’ right to information and to provide them access to fair and reasonable pricing of petroleum products.