By ARNOLD PADILLA
SINCE the start of the year, local pump prices have increased significantly. The government, as always, explains this as the operation of global market forces. Remember that the government deregulated the oil industry, and the country imports almost all its petroleum needs. As such, local price adjustments merely reflect the movement of international oil prices and fluctuations in the peso-dollar exchange rates. At least, that is what government and the oil firms want us to believe.
P4-5 overpricing at the pump this year
But this explanation is not as straightforward as it appears to be. Pump price adjustments do not reflect global price movements. As of the first week of October, the price of gasoline in the Mean of Platts Singapore (MOPS) has gone up by about P11.49 ($0.23) per liter. Meanwhile, the pump price of gasoline as of Oct. 5 has jumped by P16.55 $(0.33) per liter – P5.06 ($0.10) higher than MOPS. The same thing is true with diesel. MOPS diesel increased by around ?10.86 per liter while the pump price of diesel surged by P15.00 ($0.30)– a difference of P4.14 ($0.087) per liter.
MOPS is the benchmark that the country uses for local petroleum products, according to the Department of Energy (DOE). It is “the daily average of all trading transactions of diesel and gasoline as assessed and summarized by Standard and Poor’s Platts, a Singapore-based market wire service.”
The difference between the adjustments in MOPS and actual price changes at the pump is a form of overpricing that has thrived under the Oil Deregulation Law. This 25-year-old law allows oil companies to implement automatic price adjustments based on global price movements.
By implementing higher price hikes or lower rollbacks than international price adjustments, oil firms and the government can collect billions of pesos in extra profits and taxes. Overpriced gasoline and diesel, for instance, gave them an estimated P38.47 billion (US$757.13 million) in additional income, of which P4.62 billion ($90.93 million) went to the government as value-added tax (VAT). This exploitation of the consumers by the oil companies and government becomes even more reprehensible amid the pandemic that has massively wiped away jobs and incomes.
In other words, regardless of whether oil prices are up or down, deregulation allows oil companies to earn additional profits. But the situation for the consumers becomes doubly burdensome when oil prices are rising. There have been 32 rounds of oil price hikes for gasoline and 31 for diesel already this year, including the past seven straight weeks. Diesel, at one point, saw its pump price go up for 14 consecutive weeks between April and July.
The direct cause and effect relationship between higher oil prices and faster inflation means more significant distress for most people battered by COVID-19 and the economic crisis. This year, the prices of essential goods and services are moving nearly twice as fast compared to the first year of the pandemic. The inflation rate from January to August averaged 4.4 percent; during the same period last year, it was at 2.5 percent. (To be continued) (Bulatlat/PN)
P4-5 overpricing at the pump this year
But this explanation is not as straightforward as it appears to be. Pump price adjustments do not reflect global price movements. As of the first week of October, the price of gasoline in the Mean of Platts Singapore (MOPS) has gone up by about P11.49 ($0.23) per liter. Meanwhile, the pump price of gasoline as of Oct. 5 has jumped by P16.55 $(0.33) per liter – P5.06 ($0.10) higher than MOPS. The same thing is true with diesel. MOPS diesel increased by around ?10.86 per liter while the pump price of diesel surged by P15.00 ($0.30)– a difference of P4.14 ($0.087) per liter.
MOPS is the benchmark that the country uses for local petroleum products, according to the Department of Energy (DOE). It is “the daily average of all trading transactions of diesel and gasoline as assessed and summarized by Standard and Poor’s Platts, a Singapore-based market wire service.”
The difference between the adjustments in MOPS and actual price changes at the pump is a form of overpricing that has thrived under the Oil Deregulation Law. This 25-year-old law allows oil companies to implement automatic price adjustments based on global price movements.
By implementing higher price hikes or lower rollbacks than international price adjustments, oil firms and the government can collect billions of pesos in extra profits and taxes. Overpriced gasoline and diesel, for instance, gave them an estimated P38.47 billion (US$757.13 million) in additional income, of which P4.62 billion ($90.93 million) went to the government as value-added tax (VAT). This exploitation of the consumers by the oil companies and government becomes even more reprehensible amid the pandemic that has massively wiped away jobs and incomes.
In other words, regardless of whether oil prices are up or down, deregulation allows oil companies to earn additional profits. But the situation for the consumers becomes doubly burdensome when oil prices are rising. There have been 32 rounds of oil price hikes for gasoline and 31 for diesel already this year, including the past seven straight weeks. Diesel, at one point, saw its pump price go up for 14 consecutive weeks between April and July.
The direct cause and effect relationship between higher oil prices and faster inflation means more significant distress for most people battered by COVID-19 and the economic crisis. This year, the prices of essential goods and services are moving nearly twice as fast compared to the first year of the pandemic. The inflation rate from January to August averaged 4.4 percent; during the same period last year, it was at 2.5 percent. (To be continued) (Bulatlat/PN)
