Gasoline up by 626%, Diesel by 746%, since Deregulation


In April 1996, gasoline was only P9.50/liter, diesel P7.03. Unleaded gasoline is now priced at P59.47/liter and diesel at P52.48, a whooping 626-percent increase for gasoline, 746 percent for diesel.

BY ALEXANDER MARTIN REMOLLINO
Bulatlat
Vol. VIII, No. 21, June 29-July 5, 2008

Unabated jumps in the prices of petroleum products continue in the Philippines. Prices of gasoline and diesel have gone up 16 times, and by no less than P12 a liter, since last January alone. Gasoline and diesel prices have jumped by P15.01 and P14.00 a liter, respectively, since the start of the year.

As of June 28, gasoline stands at P59.47 ($1.33 at the June 27 exchange rate of $1:P44.79) a liter, while diesel is at P52.48 ($1.17) a liter.

Oil price hikes severely affect the prices of commodities, as petroleum products are used in the production and transportation of goods.

Data from the Center for Women’s Resources (CWR) shows that from April 2007 to April 2008, prices of prime commodities have increased by a range of 7.33-88.89 percent.

These price increases took place even as the peso is supposed to have grown stronger against the dollar from April 2007 to April 2008. Data from the Bangko Sentral ng Pilipinas (BSP or Central Bank of the Philippines) shows that from $1:P47.82 in April 2007, the peso registered at $1:P41.82 in April 2008.

Last May alone, food prices soared by 14 percent, according to the Bagong Alyansang Makabayan (Bayan or New Patriotic Alliance), with commercial rice now costing no less than P32 a kilo.

The inflation rate nearly doubled from December 2007 to March this year. From 3.9 percent in December 2007, the inflation rate shot up in the succeeding three months to 6.4 percent. Last May, the inflation rate reached a nine-year high.

Oil firms have claimed that the frequent spikes in the prices of their products are offshoots of their supposed need to recover losses from the jumps in world oil prices. They have recently implemented weekly price hikes of P1.50.

But frequent oil price hikes are nothing new in the Philippines. The Philippines has been suffering from increasingly frequent oil price hikes since the deregulation of the downstream oil industry.

The downstream oil industry was deregulated in April 1996, upon the passage of Republic Act No. 8180. Two years later, RA 8180 would be replaced with RA 8479, which eliminated the first law’s provisions on tariff differential, stocking of inventories, and predatory pricing.

President Gloria Macapagal-Arroyo, who was a senator in 1995-1998, authored RA 8479 among other laws paving the way for the Philippines’ entry into the World Trade Organization (WTO) framework.

“The problem with deregulation is that it assumes that there is free competition, meaning that supply and demand are the decisive factors,” said Arnold Padilla of Bayan’s public information department. “But the world oil industry, of which the Philippine oil industry is part, is monopolized and because of that, it is easy to dictate prices and bring these up artificially.”

“Whether or not there are oil price hikes, world oil prices have already been high to begin with, because these are dictated (by the monopolies),” Padilla, who wrote several papers on the oil industry for the socio-economic think tank IBON Foundation before joining Bayan, also said. “A deregulated environment allows the monopolies to further bring up prices of petroleum products through manipulation and transfer pricing.”

Data from the Department of Energy (DoE) show that under deregulation, the Philippines has been suffering from more frequent oil price hikes than during the pre-deregulation period. The increased frequency of oil price hikes under the deregulated environment contributed greatly to bringing prices of petroleum products to their present exorbitant levels.

Historical Pump Prices of Gasoline and Diesel
(In pesos/liter)

Period

Gasoline

Diesel

1975-1995 average

5.99

3.98

April 1996

9.50

7.03

January 2001

16.56

13.82

2003 average

18.52

15.71

2004 average

23.55

20.10

2005 average

31.91

28.74

2006 average

39.27

34.48

October 2007 average

42.45

36.95

June 28, 2008

59.47

52.48

Source: Department of Energy

Using the June 28 figures, we can see that the prices of gasoline and diesel have gone up by 626 and 746 percent, respectively, since the implementation of the Downstream Oil Industry Deregulation Act.

Both the government and oil firms have claimed that local oil price hikes are the results of uncontrollable developments in the world market. But drops in world crude prices have not always translated into slides in local oil prices, and there have been instances when oil companies in the Philippines jacked up the prices of their products even in the absence of spikes in the world market. The period 1998-August 2001 can be cited for reference.

World Crude vs. Local Oil Prices, 1998-August 2001

Period

World Crude Oil

$/petroleum barrel

Forex

P/$1

Local Gasoline

P/liter

Local Diesel

P/liter

1998 average

12.2

40.90

12.20

8.30

1999 average

17.2

39.10

12.90

8.90

2000 average

26.1

44.30

16.60

11.90

January 2001

22.9

50.90

18.10

13.80

February 2001

24.8

48.20

18.10

13.80

March 2001

23.5

48.50

18.10

13.80

April 2001

24.2

50.30

18.10

13.80

May 2001

25.6

50.50

18.60

14.30

June 2001

25.7

51.60

18.60

14.30

July 2001

23.4

53.30

18.90

14.60

August 2001

24.5

51.90

18.70

14.40

Source: Business World, Sept. 5, 2001

Recent data from IBON Foundation shows that as much as P31 a liter of the pump prices of petroleum products in the Philippines go to oil companies’ windfall profits.

IBON based its figures on its estimates of the actual cost of oil at $31-32 per barrel. By subtracting this from the May 2008 average Dubai spot price of $117/barrel, IBON estimates that the oil firms may have already earned windfall profits of $86-87for every barrel of crude oil.

Applying this to local pump prices, at $159/barrel of crude oil in the world market and using a $1:P43 exchange rate, IBON came up with figures showing that P26-31/liter and P23-27/liter of the prices of gasoline and diesel, respectively, go to oil companies’ windfall profits.

“The market should be regulated,” Padilla said. “This means automatic price adjustments should not be allowed.”

The effects of automatic and arbitrary price adjustments under the Philippines’ deregulated regime have been aggravated by speculation in the futures market, which has intensified since 2001 – the year the U.S. launched its global war on “terror.”

“That aggravated the situation,” Padilla said. “If before prices were already unaffected by the dynamics of supply and demand, but prone to manipulation because of deregulation, speculation pushed oil prices further up.”

“This issue of speculation actually boosts our argument against deregulation,” Padilla also said. “This boosts our argument for regulation.” Bulatlat

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3 Responses to “Gasoline up by 626%, Diesel by 746%, since Deregulation”

  1. mig Says:

    Hey Thanks for the info, it’s really a wake up call for the government to see the big gap/differences from the prices in the past years.

  2. Zwiti Pantejo Says:

    Indeed. That is a striking opinion. Oil price hikes in the Philippines if we say, could be the most major cause of POVERTY. It is undeniably seen based upon the information you’ve given that prices today is of a big difference than of the past years. People does not anymore need for an eye-opener or a nerve wrecking article to feel the burden that petroleum prices bring. People only need action from the government with cooperation of the countrymen and the foreign investors of gasoline.
    The Philippines is rich with natural resources, we just don’t know how to take it into good use and proper propagation. The stand is for us to discover new alternatives of gasoline.

    BarangayRP:

    Absolutely right! 🙂

    Electric cars are the best alternative. But before investing on those, the government should invest first on putting up power plants that are being run by renewable, clean and free sources of energy (solar, wind, hydro, just what our body is using). That way, having electric cars will never cause big problems to us Pinoys.

    Now in order to do that, we might as well change our leadership. We must look for a leader with vision and action and hard pair of balls to deliver just what the people needs.

  3. ferdie Says:

    I have been looking for this data. thanks a lot.

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