Sinasabi ko na nga ba e (Big 3 Oil Companies)

[loidch]

yun na!


According to Ramon Ang of San Miguel who is also running Petron, oil smuggling is causing government to lose as much as P30-billion a year. That looked like a large figure to me so I checked it out and found out that Ramon is in the right ball park if one considers the trajectory of rising oil prices in recent weeks.
The P30-billion government revenue leak is based on oil priced at $150 a barrel. At today’s prices, the loss is about P12 to P15 billion. But this excludes loss in corporate income tax as smugglers do not pay income tax. If you put that in, that brings you to Ramon’s estimate. It is a large number and given government’s current budget deficit problems, government’s first order of business should be to stop this oil smuggling.
I asked an oil industry expert and he estimates that about 30 percent of diesel sold in country is smuggled. There is gasoline smuggling as well at roughly five to10 percent of gasoline sales. In other words, you can say that 15 percent of this country’s total oil consumption is smuggled and thus not paying taxes.
Diesel accounts for 40 percent of total demand for petroleum products. Smuggled diesel accounts for 30 percent of total diesel. That means, a large part of diesel used in this country does not pay VAT and Duty of P4.50 per liter (12-percent VAT is levied on top of three percent duty).
Gasoline is 30 percent of total demand for oil products. Smuggled gasoline accounts for an estimated 10 percent of total gasoline sold in this country. That means we have all that gasoline that is not levied VAT and Duty plus excise = P8.85 per liter (specific tax is P4.35 per liter plus P4.50).
Aside from government losses in terms of uncollected taxes and duties, smuggled fuel products also pose unfair competition to the oil companies that play it by the book. Oil smuggling is also turning out to be a serious peace and order problem.
The grapevine in the oil industry is rife with stories of how foreign criminal syndicates have actually taken over a large part of the oil smuggling operations here. I guess these syndicates have economies of scale since they do it in other countries and they probably carry other products too that are considered contraband.
Most of the oil smuggling is being carried out in Subic Free Port. The Americans left petroleum loading and receiving facilities and a tank farm there with a pipeline to Clark. The government leased it to Coastal Petroleum, a pretty decent company with pretty decent people behind it, including the family of a former high official of Petron.
The problem, I am told, is that Coastal is allowing other traders to use the facilities including the pipeline to Clark. Then, Coastal conveniently disowns any responsibility for any hanky panky that happens. Of course, the customs officials at Subic and at head office in Manila too, must be profiting from all that smuggling.
The lease for the Subic facilities is a paltry P150 million a year, compared to the P30-billion tax leak. There should be enough legal reasons for government to cancel that lease and for the meantime, run the facility itself under strict supervision from an elite group of enforcers from DOF, BIR and Customs. That is assuming of course, there are honest people left in those agencies who can be entrusted with the work.
Oil smuggling is a good governance test for Ate Glue. If she can really stop the smuggling in her remaining days (assuming she is leaving next year), she will leave one clear accomplishment. She will also disprove rumors that people very close to her are profiting from oil smuggling.
Recovering revenues that are currently lost by government is a clear benefit. Showing she is capable of good governance to the surprise of most Filipinos, is another benefit. Still another benefit is stopping the foreign criminal syndicates from gaining a foothold in this country with the help of their local partners. Look at what’s happening to Mexico after the criminal syndicates practically took over the country. They may be smuggling oil today but it is an easy jump to drugs and other contraband. The system of evading law enforcers or corrupting them is the same.
And don’t believe anyone who says there is no oil smuggling taking place. The numbers provide the evidence. Total oil product demand (net of industrial fuel oil used for power) has declined by an average of -1.2 percent a year. Diesel has declined by 0.6 percent. Yet, you and I know there are more and more cars and trucks added every year. In fact, car registration has grown by an average of 5.5 percent a year. How can there be more cars and trucks yet less fuel being used?
Ate Glue should use her penchant for micro management and assume the title of anti smuggling czar so this problem can be dealt with once and for all. Success in this effort will generate success in other areas as bureaucrats get the message that finally, she really means to do the right thing. That would help generate tax revenues in other areas of the economy that currently evade paying their dues. When potential investors see the rule of law starting to reign, more of them will come to risk capital here.
Hopefully, Ate Glue is interested in saving the one legacy she can claim thus far… good fiscal management. That legacy is in danger of going down the drain in her final months as the budget deficit reached P123 billion for the period January to May 2009.
Government assurances that it will achieve the full year deficit target of P250 billion is hardly credible. Fears have been publicly expressed by some financial institutions, that this target can be breached to reach as high as P400 billion.
But even if they hit this target, that number is in itself worrisome. This will be the highest nominal deficit incurred by the National Government. This will constitute 3.2 percent of GDP: while not the highest historically, it will breach the three percent threshold that economists consider sustainable.
Francis Varela of the Foundation for Economic Freedom has written that “whether the 2009 deficit will be P250 billion or P400 billion, we have a looming fiscal crisis ahead of us. The current trajectory of revenues vis-à-vis expenditures points to a further widening of this deficit in 2010.”
Tax collections by the Bureau of Internal Revenue and Bureau of Customs have dropped by 6.6 percent. If sustained for the rest of the year, this will be the first time that government revenues will have registered a nominal decline. On the other hand, expenditures have grown 15.6 percent to date.
Then again, the IMF once observed that the understatement of imports (how technocrats politely refer to smuggling) is due to “election related lenience” or what less diplomatically constrained people may call “state sponsored smuggling”. If so, given the stakes are higher for 2010, smuggling can only get worse to raise campaign funds.
Ate Glue must make an example of oil smuggling if she wants to deliver the message that she isn’t as hopeless as many of her countrymen think she is. She can salvage her tattered reputation by a no nonsense anti oil smuggling drive. Indeed, oil smuggling is a good test of governance for Ate Glue. Will she pass it? Will she even take up the challenge?

Fiscal deficit

Here’s a one liner attributed to Ronald Reagan.
“I am not worried about the deficit. It is big enough to take care of itself.”
Boo Chanco’s e-mail address is bchanco*gmail.com




http://www.philstar.com/Article.aspx...bCategoryId=66

[uls]

^^^

that article is all about smuggling and tax evasion

not about the rising price of fuel

if smuggled fuel has any effect on pump prices, it should lower it

smugglers have lower cost (they don't pay taxes obviously) so they can retail their products at lower prices

(maybe that explains the lower pump prices of some gas stations in Subic)

the article above doesnt explain anything about rising fuel price

[uls]

here's something that explains why oil hit $73 the other day

‘Rogue broker’ blamed for oil spike
http://www.ft.com/cms/s/0/e0ae2b2a-6...nclick_check=1

The startling spike in oil prices to their highest level this year on Tuesday was caused by a rogue broker who placed a massive bet in the Brent oil market, triggering almost $10m (€7m) of losses for his company.

PVM Oil Associates, the world’s largest over-the-counter oil brokerage, said on Thursday it had been the “victim of unauthorised trading”. The privately owned company said that as a result of the unauthorised trades it had been forced to close substantial volumes of futures contracts at a loss.

Oil traders in London and New York said the “unauthorised trading” explained the exceptional spike in business activity and prices in the early hours of Tuesday that some initially thought must have been caused by a geopolitical event. “Trading volumes rose overnight and prices jumped more than $2 a barrel without apparent justification,” a senior oil trader in New York said.

Prices rose in one hour from $71 to $73.5, the highest level for the year, according to Reuters data. In total, futures contracts for more than 16m barrels of oil changed hands in that hour – equivalent to double the daily production of Saudi Arabia, the world’s largest oil producer, and far more than the traditional 500,000 barrels for that time of the day.