Oil firms dodge DOE circular to unbundle petro fuel cost

By Lenie Lectura- September 3, 2018
https://businessmirror.com.ph/oil-firms-dodge-doe-circular-to-unbundle-petro-fuel-cost/

A plan to issue a circular requiring oil firms to unbundle the costs of petro fuel has been put on hold pending review of the proposed policy, according to a Department of Energy (DOE) official.

“It [the plan to issue a circular] is currently being reviewed further because there are worries about potential issues raised by the stakeholders regarding claims of anticompetitive behavior,” said DOE Assistant Secretary Leonido Pulido last week.

Energy Secretary Alfonso G. Cusi said the objective of the proposed circular is to guide the consumers in making informed decisions and explain to consumers the cost components of petroleum products.

“There are costs that can’t be divulged by industry players. On our part, the oil industry is deregulated. We just want the public to understand the composition of fuel pricing for them to be better informed so they will make the right choice,” he said in a separate statement.

The DOE had planned to issue the circular at end-June. However, the agency had to conduct another round of focus group discussions with the stakeholders.

The draft policy enables the unbundling of the base prices of petroleum products, namely, gasoline, automotive and industrial diesel, kerosene, jet fuel, bunker fuel oil and household and automotive liquiefied petroleum gas. This is the first time that the government, through the DOE, will require oil companies to make public the breakdown of the costs that go into the pricing of fuel.

The DOE also wants oil companies to provide a weekly notice of the price adjustments—whether to decrease, increase or keep the price—alongside the computation of their products’ components based on the elements involved in the international price movement, the biofuels cost and the operational cost recovery.

Independent Philippine Petroleum Companies Association (Ippca) President Bong Suntay had explained that each oil firm has its own proprietary elements of cost, which should be kept confidential because this allows an oil firm to have a competitive edge over the other.

“It is like asking KFC [Kentucky Fried Chicken] to give out their recipe and divulge the seven secret herbs and spices used in their chicken. Definitely, each one has their own computation, which may differ from each other. Various factors would also have an impact, where the product is sourced, when it was sourced, the amount purchased, the size of the vessel, among others,” Suntay said.

The Ippca official said that if the DOE wants to extrapolate, then it can start from the published Mean of Platts Singapore (MOPS). Suntay also said that feeding the DOE with so much information could be tedious.

“The premium—ocean freight and trader margin—also differs from each company, depending on various factors, such as term of payments, size of vessel and loading origin. Forex also differs depending on cost of purchaser. Prices now change weekly.

“To require the industry players in a deregulated industry to break down their pricing would put another layer of tedious reportorial requirement, which would really be of no use in a deregulated industry,” Suntay said.

The Philippine Institute of Petroleum had said that the extent of information that the government requires from them, and the manner by which it requires to do so, are “inconsistent with the policy of deregulation.”

“The position is that there is no need to unbundle,” said PIP Executive Director Teddy Reyes over the phone. “We felt that since all factors on how prices are arrived at are transparent, since these are published and known to everyone, then it would be ‘unnecessary’ for the unbundling.”