Friday, 15 May 2009

Local Oil Price Hikes Exceed Global Increases, Says Study

As oil companies hike prices anew, a study by research group IBON Foundation reveals that local pump prices have been rising by more than the price of crude oil.

An analysis of monthly price data from January 1999 to March 2009 shows that local pump prices have apparently been rising by more than the price of Dubai crude converted to pesos at prevailing exchange rates. The price of Dubai crude per liter rose an average of 16 centavos (P0.16) per month over the January 1999 to February 2006 period while the pump price of diesel per liter rose an average of 21 centavos (P0.21) per month.

The divergence was even larger in the post-RVAT period of volatile oil prices, when the 12% reformed value-added tax was imposed on petroleum products beginning February 2006. The price per liter of Dubai rose by an average of 12 centavos (P0.12) per month from February 2006 to March 2009 while diesel pump prices rose by a much higher average of 24 centavos (P0.24) per month.

Unless some other factors have been significantly affecting pricing, this suggests that local oil players have effectively been overcharging beyond what is warranted by movements in international crude prices. These are computations based on what relevant data is publicly available and would certainly be more accurate if there were greater transparency and accountability in oil pricing. These also do not yet reflect superprofits made by the global cartel of major oil companies, the research group said.

The price movements were computed by charting monthly Dubai crude and diesel pump prices and then calculating respective trendlines. The relevant slopes were then interpreted as the average increase in centavos per month. The price of Dubai crude was calculated per liter rather than the conventional per barrel for easier comparability and is not based on any assumptions regarding production costs.

The questionable pricing of oil products is only one of the arguments of IBON and cause-oriented groups against the oil deregulation law. The law, which only further strengthens the monopoly of giant transnational oil companies, should immediately be repealed to protect the consumers against the highly speculative and monopolized oil industry.

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