Oil firms must unbundle prices

Energy officials also face difficulty in reviewing prices, as representatives of oil firms are very elusive about the reasons for the weekly swings in prices, aside from the Singapore benchmark

Rising fuel prices are among the gut issues the government must address or face widespread discontent. The demand is not only to reduce costs at the pump but also to be transparent about it.

A proposal to amend the Oil Deregulation Law has long been pending in Congress. The bill seeks to introduce a provision to unbundle the items that go into gas station bills, similar to the scheme for monthly electricity bills.

The strongly pro-consumer measure seeks retail price segregation, which should reveal the landed cost of crude oil or finished petroleum products, port charges and other imposts, refining cost for crude oil, storage cost, handling cost, marketing and transshipment costs.

Economists wonder about the resistance to the unbundling proposal while the Oil Deregulation Law requires transparency and fair fuel pricing.

The proposal is also consistent with the aim of the law to maintain a level playing field, as it would help spot anti-competitive practices, including predatory pricing and even smuggling.

The resistance that translates to strong lobbies comes from the moneyed fuel companies whose interests are placed above those of consumers who are left guessing every time they gas up.

Energy officials also face difficulty in reviewing prices, as representatives of oil firms are very elusive about the reasons for the weekly swings in prices, aside from the Singapore benchmark.

The Department of Energy, among other things, seeks in the pending bill the removal of “doubt of the power of the DoE to implement the unbundling of price components.”

According to former energy secretary Al Cusi, “The DoE has strongly pushed for a transparency framework in the computation of oil prices to ensure the public is protected and that any increase is competitive, fair, and reasonable.”

The DoE issued Department Circular 2019-05-0008 to unbundle pump prices by requiring oil companies to submit detailed components of both the price adjustments and the total price from the bulk down to the pump price level, but without a law, the directive has been tentative.

Its implementation was hampered by a court injunction issued in favor of a petition by giant oil firms.

Under Republic Act 8479, or the Downstream Oil Industry Deregulation Act, the DoE’s powers are limited to monitoring price adjustments. The agency does not have the authority to intervene or keep prices under control, even if there is unwarranted market disruption.

Through the sought legislation, the DoE could require oil firms to monitor the components of the domestic prices of petroleum products.

Thus, instead of the weekly price announcements and giving the public the total increases thus far in the year, the agency could go further by providing a breakdown of the charges in the components that go into fuel pricing.

The law would compel disclosure since industry players cite trade secrets and non-disclosure agreements to hide items in fuel prices.

They claim the unbundling order would cause them to violate non-disclosure agreements in some of their supply contracts, which have long been suspected of containing huge transfer costs that go to the mother company.

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