House panel OK’s unbundling of oil prices – BusinessWorld Online

A HOUSE of Representatives committee on Tuesday approved a bill that seeks to prevent oil companies from raising prices of old stock via changes to the Downstream Oil Industry Deregulation Act, amid soaring global fuel prices.

The measure approved by the Committee on Energy — subject to form and style changes — also requires oil players to increase their minimum inventory to prevent fluctuations in local fuel prices.

“Unbundling the retail price of domestic petroleum product does not run counter to the principle of deregulation, and is, in fact, a tool to ensure its effectivity. Thus, the DoE (Department of Energy) must be mandated and capacitated to monitor the unbundled retail prices,” Marikina Rep. Stella Luz A. Quimbo said during the hearing.

The DoE has been pushing for the unbundling of oil prices, even issuing in 2019 a circular requiring oil firms to submit a detailed computation of the price components with every retail price adjustment of petroleum products. However, a local court issued a temporary restraining order on its implementation.

Ms. Quimbo said the country’s oil price monitoring should not be based on the weekly changes in the Mean of Platts Singapore. She said this would prevent firms from “unjustly” adjusting retail prices, even if inventory was purchased at a lower price.

Ms. Quimbo also proposed to include a provision in the bill giving the President the power to suspend or lower the excise tax rates on fuel products when the price of Dubai crude oil reaches $80 per barrel.

“This way, we could balance the interest of the people while maintaining a deregulated market,” she added.

Local fuel retailers implemented the biggest weekly price increase on Tuesday, after global crude oil prices surged last week due to jitters over Russia’s invasion of Ukraine.

‘NOT THE SOLUTION’
However, the oil industry is opposing these amendments, including the unbundling of prices and the provision requiring refiners, importers and bulk distributors to maintain 30 available days’ supply of finished petroleum products.

In a Viber message, Fernando L. Martinez, president of the Independent Philippine Petroleum Companies Association (IPPCA), said: “Price unbundling is not the solution to reduce the local price of fuels.”

He shared IPPCA’s position on the matter that cites the cause of price distortions in different locations to include the distance from a fuel depot to a retail location, real estate cost, and the cost of permits.

IPPCA is composed of more than a dozen oil companies, including Unioil Petroleum Philippines, Inc., Seaoil Philippines, Inc., Filoil Energy Co., Inc. and Eastern Petroleum Corp.

Mr. Martinez, who is also chairman and chief executive officer of Eastern Petroleum, in a Senate hearing on Monday said that the association does not see any benefit in analyzing the components of oil companies’ pricing.

“It has been there,” he said, referring to the submissions of the companies to the Energy department.

He enumerated these components to include the petroleum product cost itself, transportation and operating costs, but excluding disclosures disallowed by non-compete clauses in their agreements with suppliers.

Separately, Phoenix Petroleum Philippines, Inc. Senior Vice-President Raymond T. Zorrilla said in a text message: “We have yet to see the copy of the bill. But as a commitment to the public, we shall always adhere as to what is required by law.”

The other oil companies that were sought for comment did not immediately send their response.

SPECIAL SESSION SOUGHT
Pampanga Rep. Juan Miguel M. Arroyo, one of the bill’s co-authors, urged Malacañang to call for a special session and certify the proposed amendments to the oil deregulation law as urgent.

Malacañang earlier this month urged Congress to review the oil deregulation law, but did not say if it will call for a special session. Congress is currently on a break for the May 9 elections.

When asked if Congress has time to tackle the amendments to the oil deregulation law, Senate President Vicente S. Sotto III replied: “Too little (time), let’s just say that.”

Senator Panfilo “Ping” M. Lacson, Sr. told reporters on Viber that it’s too early to say that the House plenary will approve the bill.

“I’m not saying it’s dead, but it’s too premature to say that it will be approved by the House of Representatives, because it’s just a panel, a committee. It will still be debated on,” he said in Filipino. “We’re not saying that (there’s no time). We’re going to see how urgent it is and when it will be passed.”

The Downstream Oil Industry Deregulation Act, or Republic Act No. 8479, removed government control on the pricing, exportation, and importation of petroleum products, allowing market forces to dictate oil prices.

Meanwhile, Bayan Muna Rep. Carlos Isagani T. Zarate said that while he supports the amendments to the oil deregulation law, it should be repealed.

“We propose (that the oil prices) should return to a regulated regime, because these past 24 years, we have become a hostage to large petroleum companies. The government’s only role has become the one who announces how high they will increase the price or if they will have a small rollback, if any,” Mr. Zarate said in Filipino.

He also pushed for the passage of bills to suspend the excise tax on fuel, establish a National Petroleum Exchange Corp., which would serve as a centralized procurement of petroleum products and would allow the government to regain control of Petron Corp. — Jaspearl Emerald G. Tan and Victor V. Saulon