MANILA, JULY 21, 2008
(STAR) By Paolo Romero - Following an urgent appeal from President Arroyo, the country’s top oil companies agreed to roll back the prices of diesel by P1.50 per liter, a day after implementing a whopping P3 increase on the socially sensitive fuel product on Saturday.

Press Secretary Jesus Dureza announced the oil companies Petron Corp. and Pilipinas Shell, along with other independent oil players, have agreed to cut down the increase by half.

“The President issued an appeal to oil companies in the country in the light of the recent P3 increase especially on diesel fuel… in an effort to cushion or soften impact of such increase,” he said.

According to Dureza, Executive Secretary Eduardo Ermita, acting on the President’s instructions, called up the officials of the two oil companies for a meeting last Saturday afternoon and asked them to reduce their diesel pump prices to cushion the impact of the surge in food and fuel prices on Filipino consumers.

Dureza made the announcement in a hastily called news conference in Malacañang yesterday after the officials of the two oil companies agreed to cut down their increase in diesel fuel.

“We express our thanks to oil companies for responding positively to this, it will go a long way in cushioning the impact (of soaring oil prices) on the masa (masses), ordinary people especially those using diesel fuel,” he said.

Dureza said Malacañang is hoping that other oil firms would follow.

“We would assume when two big players make decision (to reduce their pump prices) everyone will follow,” Dureza said.

Seaoil, for its part, said they would implement a P1.50 rollback in diesel in response to Mrs. Arroyo’s appeal.

Chevron (formerly Caltex) and Unioil, on the other hand, said they would implement the P1.50 rollback on diesel effective today.

The oil companies agreed to implement the rollback on diesel fuel, considered the lifeline of the public transport sector.

There was no announcement, however, on the possibility of reducing gasoline prices.

Diesel prices rose by P3 per liter on Saturday despite the drop in global fuel costs. It was the 20th time this year diesel prices were raised and so far the biggest increase imposed by oil companies.

On the other hand, Dureza said Mrs. Arroyo was elated over the decision of the oil companies to heed her call to reduce prices of diesel.

The announcement came on the heels of a Social Weather Stations (SWS) survey that showed Mrs. Arroyo’s net satisfaction rating plunging to a record low of negative 38 percent.

Officials blamed the spate of increases in the prices of food and fuel for the sagging popularity of Mrs. Arroyo.

When asked whether the move to convince the oil companies to reduce diesel prices was connected to the poor ratings, Dureza said the President will still make the decision, “irrespective of whether she’s popular or unpopular, will do what is right for the nation.”

Ermita, for his part, said he did not find it hard to convince the two oil firms to heed the presidential appeal.

Ermita convinced the oil officials that “there’s a way to recover” their so-called “under-recoveries” in the prices of diesel.

Oil companies claimed the need to recover at least P3.81 per liter of diesel following the successive increases in the prices of crude in the world market.

Ermita said Mrs. Arroyo instructed him late Friday to talk with the oil companies.

Ermita said he called up Petron chairman Nicasio Alcantara, who was abroad, around 2 p.m. and got a “positive response” from him.

Alcantara also suggested to Ermita to call up Pilipinas Shell.

Ermita said he was able to talk with Pilipinas Shell chairman Edgardo Chua who granted the President’s request.

“Everybody is reeling from all these increases, and this (P3 increase in diesel prices) was very abrupt,” Ermita said.

“They were very considerate but we also have a certain position to protect the industry,” he said.

Petron spokeswoman Virginia Ruivivar said they took into consideration the appeal made by the President to reduce the prices of diesel.

“We understand why she made the appeal,” Ruivivar said.

“It’s a question of moderating the adjustment so in time we will fully recover our cost, we cannot continue to operate at a loss,” she said.

The rollback, however, may be not for long, according to Ruivivar, citing the losses that oil companies need to recoup.

“We have not made decision yet,” Ruivivar said when asked when another round of increases would be announced.

“It’s not something we can comment on with certainty. It’s a question of trying to soften the impact of (price increases),” she said.


Militants and transport groups, however, claimed the price rollback on diesel is a “farce.”

“The P1.50 rollback in diesel prices is a farce. The rollback today will be eventually be recovered possibly after five days, or next Friday,” Bayan Muna spokesman Renato Reyes said.

Reyes claimed the oil companies are merely deferring the increase.

“It’s also a form of damage control since (Mrs. Arroyo’s) State of the Nation Address is just a few days away and the public outrage over her inability to control prices (is growing),” he said.

The Pinagkaisang Samahan ng mga Tsuper at Opereytor Nationwide (PISTON) dismissed the rollback as a minuscule and poor consolation to the transport sector already reeling from the weekly increase in fuel prices.

The Department of Energy (DOE), on the other hand, will meet with the oil companies today to discuss the implications of their recent move to adjust diesel prices by P3 per liter.

Industry sources said Energy Secretary Angelo Reyes apparently wants to be kept abreast of the price adjustments of the oil firms, amid allegations by some sectors that they are overcharging consumers.

Sources said Reyes is also expected to discuss with the oil companies the recently signed memorandum of agreement that strengthened the power of the DOE-Department of Justice (DOJ) task force.

Under the MOA, the joint task force is allowed to investigate the oil firms over the spate of increases.

The government has no right to intervene in the oil pricing under the Oil Deregulation Law, but with the continuing rise in crude prices and claims of incurring under-recoveries, the task force was formed in response to public clamor to manage the price movements.

IBON Foundation Inc., an advocacy group that provides research on socioeconomic issues, claimed the oil companies have been overcharging.

Secretary Reyes said he would call the representatives of IBON to present their research before the meeting.

Pilipinas Shell chairman Chua said they are not hiding anything.

“I would actually welcome a dialogue with IBON, so that we can understand where both of us are coming from. The main reason behind that are the accusations of transfer pricing and huge profits,” Chua said.

On the issue of transfer pricing, Chua said the petroleum industry is one of the most transparent industries.

“(Pricing) can easily be seen because there is a PLATTS (Mean of Platts Singapore) benchmark. And the issue of windfall profits, they need to see what or where the money was spent,” he said.


A senior lawmaker also raised the possibility of investigating the oil companies for the runaway increases of their products.

According to Cebu Rep. Eduardo Gullas, the public is now wary of the abuses committed by oil companies in increasing fuel prices.

Gullas pointed out that under the Oil Deregulation Law, either the executive or legislative department can “direct” the DOE to “investigate and report the facts relating to any alleged violation… by any person or corporation.”

“Consumers are now extremely vulnerable to potential pricing abuses,” Gullas said.

He said the DOE should utilize its vast powers under the Oil Deregulation Law.

“The law did not render the DOE helpless with regard to any excessive and unreasonable increases in the prices of petroleum products,” Gullas stressed.

He said the DOE is empowered under the law to check possible price manipulation and similar abuses.

On the other hand, Gullas accused Petron and Shell of earning a staggering P70 billion in “net profits” for the last 10 years, since the oil deregulation law took effect in 1998.

Gullas said Shell posted P33.59 billion in cumulative net profits from 1998 to the first quarter of 2008. Petron, on the other hand, cleared P35.18 billion in profits over the same period.

“The law has definitely been a boon to the two oil refiners and other players. There’s also no question that as a result of soaring world oil prices, industry players are enjoying enormous pricing power that has enabled them to pump up their profits,” Gullas said.

Since January, oil companies have increased diesel and kerosene prices 20 times, by a total of around P22 to P24 per liter. They have also raised gasoline prices 19 times, by a total of about P19 per liter.

Shell previously reported a net profit of P3.1 billion from January to March this year. Petron posted a net profit of P658 million in the same period.

From 2005 to 2007, Shell’s annual net profit averaged P5.41 billion, while Petron’s averaged P6.03 billion.

The third of the so-called “Big Three” - Caltex Philippines Inc., now renamed Chevron Phils. Inc. - has since closed down its 72,000-barrel of oil per day (BOPD) refinery in San Pascual, Batangas.

Chevron now merely operates a finished petroleum product import terminal in Batangas with the capacity to store 2.7 million barrels. The figures with respect to Chevron’s financial performance were not readily available.

Chevron is no longer subject to the same rigorous disclosure and financial reporting rules that apply to Shell and Petron, according to Gullas.

Chevron nonetheless last reported a net profit of P2.75 billion in 2006.

Petron controls 39 percent of the local market for petroleum products. Shell has a 31 percent market share, and Chevron, 15 percent.

New oil players that included Seaoil and Unioil corner the remaining 15 percent.

Petron runs a 180,000-BODP refinery in Limay, Bataan. Shell runs a 110,000-BOPD refinery in Tabangao, Batangas. –With Donnabelle Gatdula, Rainier Allan Ronda, Delon Porcalla

Oil firms give in to PGMA's appeal, price hike cut by half to P1.50 per liter effective Monday FROM OFFICE OF THE RPESS SECRETARY, MALACANANG, JULY 21, 2008

THIS COPY IS CULLED FROM THE MALACANANG WEB SITE: Responding to the appeal of President Gloria Macapagal-Arroyo, Petron and Shell, two of the country’s three biggest oil industry players, agreed today to roll back the pump price of diesel fuel by P1.50 per liter effective 12:01 a.m. tomorrow (Monday).

Press Secretary Jesus Dureza announced the oil firms’ decision at a press briefing this morning in Malacañang.

He said the price rollback, which will take effect a day after the oil companies raised diesel fuel prices by P3 a liter Saturday, “will go a long way in cushioning the impact” of high fuel prices on the people, especially the poor.

The P3-increase announced by the oil companies over the weekend pushed the price of diesel fuel to just a few centavos shy of P59 per liter.

"We would assume that when the two big players make a decision, everybody will follow," Dureza said, referring to the other oil companies operating in the country.

He said the President had instructed Executive Secretary Eduardo Ermita and Energy Secretary Angelo Reyes to talk to the two oil company officials about the possibility of bringing down the price of diesel fuel products, specifically diesel fuel.

"In an effort to cushion or soften the impact of such a hefty increase, the President issued an appeal to the oil companies…which was brought to the main players of the oil industry in the Philippines," Dureza said.

Oil industry officials imposed over the weekend the biggest increase in the price of diesel products this year due to the "substantial cost" their companies still have to recover from previous increases in oil prices in the global market.

"We are happy to announce that there was a positive response from the oil companies and so by midnight Sunday…a rollback of P1.50 for diesel fuel will be made effective," Dureza said.

In a backgrounder on the world oil price situation, the oil company officials said that when the Oil Deregulation Law was enacted in Feb. 1998, the price of Dubai crude averaged $12 per barrel.

When President Arroyo assumed office in 2001, Dubai crude averaged $23.39 a barrel.

The increase has been unstoppable with Dubai crude breaching $140 per barrel this month. The price of Dubai crude has dipped a bit but still averaged $137.02 per barrel.

Chief News Editor: Sol Jose Vanzi

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