Group says domestic fuel prices may be lowered further

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Public suspicion that the oil cartel abuses its monopoly on the industry to overprice petroleum products has not settled

Amid falling global oil prices, think tank IBON Foundation said that oil companies may be reducing pump prices less than is warranted.

IBON observed that the reduction in global oil prices far exceed that in local oil prices. The prices of Philippine benchmark Dubai crude has fallen by 75% in peso terms: priced at US$102 per barrel in August 2014 or about Php4,458 per barrel at prevailing exchange rates, Dubai crude price is down to US$23 per barrel, or just Php1,099, in the third week of January 2016.

According to computations based on weekly reports on diesel and gasoline prices by the Department of Energy, the pump price of a liter of diesel has correspondingly fallen by 53%, and gasoline by a much lesser 29%. The pump price of diesel fell from an average of Php42.10 per liter in August 2014 to Php19.65 per liter in the first three weeks of January 2016. The price of gasoline in turn has fallen from Php52.04 per liter to Php37.23 per liter over the same period.

IBON said that while there is no reason to expect that changes in the price of Dubai crude will be exactly reflected by the same magnitude in pump prices, the discrepancy between the 75% price drop in Dubai crude, the 53% drop in the price of diesel, and the just 29% drop in the price of gasoline may be cause for concern.

The research group said that the prices of diesel and gasoline were much lower the last time Dubai crude was priced near the current Php1,099 per barrel. Dubai crude was priced at US$22 or some Php1,106 per barrel in December 2000. Pump diesel was just Php14.24 and gasoline, Php17.08 then. According to IBON, even if value added tax that was not applied to oil products in 2000 is factored in, diesel is and gasoline are both still more expensive by Php3.70 and Php18.10, respectively.

Lower fuel prices would benefit not just motorists but also millions of consumers nationwide, and fuel price changes affect the price of food and other basic commodities. But public suspicion that the oil cartel abuses its monopoly on the industry to overprice petroleum products has not settled, IBON noted. In the past, this has most commonly been understood as pump prices increasing beyond what is justified when global oil prices rise, and, conversely, falling by less than is warranted when global oil prices fall, the group said.

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