Oil Companies Roll Back Gasoline Prices by 1 Peso

July 9, 2008 by Tsikot

Finally, some relief for motorists.

As more people left their cars at home and took mass transportation, oil companies announced last night a rollback of P1 per liter in gasoline prices effective today.

The announcement of Petron Corp., Pilipinas Shell Petroleum Corp., Chevron Philippines (formerly Caltex), Total Philippines, Unioil Philippines and Flying V is expected to provide a respite to car owners, many of whom have opted to leave their cars at home and take public transport instead because of the high fuel cost.

But the announcement matters little to commuters because public utility vehicles – except taxis – run on diesel.

Ramon Villavicencio, chairman of Flying V which was the first to announce a rollback, said they decided to cut gasoline prices because they have already recouped their under-recoveries for gasoline and their margins have improved.

“If there is a need to immediately lower prices, then we will do it. We have somehow recovered our margins for gasoline, unlike diesel where we still have to recover about P6 per liter to become viable,” Villavicencio said.

The unexpected adjustment came on the heels of the sharp decline of as much as $5 per barrel in the price of crude oil in the international market.

The reduction in gasoline price also followed a P2 per liter increase in the price of diesel last weekend.

During the first week of July, the price of Dubai crude, the benchmark of oil refiners, went up to $137.91 per barrel from $127.82 per barrel in June and $119.50 per barrel in May.

Raul Concepcion, chairman of Consumer and Oil Price Watch, led opposition to
proposals for a one-time increase in diesel prices by as much as P10, warning that “we will have revolution on our hands.”

Fernando Martinez, chairman of Eastern Petroleum Corp., said a staggered increase on a weekly basis is still the most acceptable to consumers.

“It would be a disadvantage to all of us and it may even trigger upheavals,” Martinez said.

Record profits

While the Big Three oil firms in the Philippines claim losses, their mother companies abroad continue to report record billions in profits, according to independent think tank IBON Foundation.

IBON noted that Royal Dutch Shell, the mother company of Pilipinas Shell, posted net income of $27.6 billion in 2007, making it the second most profitable company in the world next to oil giant Exxon Mobil. In the same year, Pilipinas Shell recorded profits of P4.12 billion.

Chevron, mother unit of Chevron Philippines, reported net income of $18.7 billion in 2007, nine percent higher than in 2006 and enough to make it the eighth most profitable company in the world. Its local unit reported P2.75 billion in profits in 2007.

Petron recorded profits of P5.94 billion in 2007. Its net income has been progressively increasing in the last three years, settling at P5.76 billion in 2006 and P3.42 billion in 2005.

It is commonly held that giant oil companies’ inflated prices encourage price speculation, which further burdens consumers.

Since January diesel and gasoline prices have increased by P16 per liter. Oil companies said they still need to recover P8 to P10 per liter given the runaway prices of world crude.

Oil companies have been raising their prices almost every week. Pump prices rose for the 18th time this year last Saturday. The continued weakening of the peso against the dollar – now at almost P46 – has also affected fuel prices.

By Donnabelle Gatdul, Philstar Online

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