POSTSCRIPT / July 4, 2000 / Tuesday

By FEDERICO D. PASCUAL JR.

Philippine STAR Columnist

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Try these questions on gasoline price hike

HELP us find the answers to these compelling questions having to do with the continually rising prices of gasoline and other refined oil products:

The giant oil firms claimed they have been losing heavily when they again raised their prices days ago. But their audited books showed that among themselves, the Big 3 actually netted profits running to a whopping P14 billion from 1966 to 1999.

Questions: Why did the oil companies think they could get away with lying to the people? Will the radio anchors defending the price increase based on alleged losses now change their spiels? Were the proper taxes paid on the oil firms’ income and that of their major stockholders? What ever happened to the law putting a limit to oil profits?

* * *

ENERGY Secretary Mario Tiaoqui is often on radio to explain why the oil companies have to do what they do, including the raising of their prices. He also serves as runner between the oil companies and President Estrada.

Questions: On whose side is Tiaoqui — with us the people or the oil companies? For a change, can he not explain the people’s plight to his President and his clients in the oil industry? When he runs errands for the oil companies, what is he carrying aside from messages to his President? As energy czar, what has Tiaoqui done to substantially reduce our dependence on oil-based fuel? Isn’t there a conflict with his also being a member of the PNOC board that owns 40 percent of Petron Corp?

* * *

THE oil cartel (Petron, Shell and Caltex) operates the only refineries in the country using crude sent by their foreign principals at prices dictated by them. Downstream, they also operate and control a vast network of gas stations that retail their petroleum products at prices that they dictate.

Questions: Why don’t we pass a law separating the refinery and the marketing businesses, and banning common or interlocking ownership of refineries and marketing outlets? (In the same way that power generation and power distribution must not be controlled by the same or interlocking interests.) Should we not free gas stations from the price dictation of the oil companies?

* * *

LIKE water and air, oil is a free gift of God. It’s just there under the ground waiting to be pumped out. The crude oil we’re buying and refining today was the same oil we were buying last year. But last year it cost only $10 per barrel, while this month — without any significant rise in actual cost of production and operation, without value added — we’re being charged $26 per barrel (160 percent more).

Questions: Since at $10 per barrel the oil sheiks were already drowning in profits, what for is the 160-percent increase in price? Since the mother companies of local refineries dictate the acquisition price and profit margins for crude, should we not look for a way to rein in also the greed of the foreign principals and crude sources of local oil companies? (These are Aramco Overseas Co. for Petron, British Shell Petroleum Co. for Shell, and US-based Caltex Corp. for Caltex)

* * *

WHENEVER the local oil firms complain of alleged losses, they point to the padded prices of the crude that their mother companies pass on to them. To recoup losses, according to their oversimplified logic, they must raise pump prices.

Questions: Are retail prices and profitability determined only by the price of raw materials? Cannot a company get cheap raw materials and still lose money because of mismanagement or some market squeeze? If they are losing money (a claim proved to be false), should not the oil companies trim their fat or get better managers? Should not government look into the velocity of the pumping of profits out of the country?

* * *

HOW do we solve the problem of rising gasoline prices? I doubt if anybody has the answer to that.

Bataan Rep. Enrique T. Garcia, who knows the business and its dark secrets because he used to be a key official of Standard Oil, has made an in-depth study and came up with his proposed National Oil Exchange (OilEx) to dampen retail prices.

His OilEx would source the total national fuel requirements from the lowest bidder, not necessarily from the local refineries if they cannot bid lower. Gas stations would then secure their supply only from the OilEx, not the losing oil companies.

The OilEx bill is about to be reported out by the House committee that looked into the issues. Its fate in the plenary chamber will depend on the sincerity of President Estrada, Speaker Manuel Villar and the 120-plus congressmen who co-signed the measure.

* * *

FROM where we sit, we see the OilEx headed for rough sailing. This we attribute mainly to the formidable lobbying of an oil cartel fighting for survival.

Garcia himself cannot take comfort in seeing more than a hundred signatures on the bill. Many of those who signed may have done so precisely in excited anticipation of being “enlightened” by the lobby.

Concerned taxpayers and NGOs could help by putting up an “OilEx Watch” to monitor the statements and actions of Speaker Villar and each and every congressman. The measure can stand refinement, but it’s still a good bill as it is.

President Estrada himself, who had congratulated Garcia for his OilEx idea attacking the problem of rising prices, has shown a sudden coldness to the OilEx after Tiaoqui reportedly delivered to him some “messages” from the oil cartel.

Besides, with him preparing to journey soon to Washington to kiss the hand of lameduck President Clinton, Mr. Estrada cannot be expected to antagonize the oil companies and their allies in America.

* * *

PARTLY because of the difficult terrain ahead, we thought we should convince the oil companies and Garcia to consider a compromise formula that would make them move toward each other and agree on a win-win formula.

We were thinking that if both the oil cartel and Garcia refuse to budge from their opposite poles, the result would be a stalemate. Such an impasse would just perpetuate the status quo where fuel prices rise whimsically on the mere say-so of the insatiable oil companies.

In a stalemate under deregulation, the oil cartel would just tighten its stranglehold on us captive consumers with the government pleading helplessness while prices keep jumping with the least pricing trigger.

* * *

THIS, then, was the compromise formula we ran in Postscript more than a month ago in the face of what we sensed was the impending stalemate, if not the outright defeat of the OilEx bill:

  • The oil firms will continue to operate their refineries, storage facilities and gas stations retailing their branded products. They can join the international bidding to be called by the National Oil Exchange, but will not be required to buy refined products from it or to sell only OilEx items.
  • Operating parallel to them, the OilEx will buy gasoline, diesel and other petroleum products directly from the lowest bidder anywhere in the world. It will store its supply initially in the Subic-Clark depots (capacity is 25 percent of national inventory), and compete with the Big 3 and other players. Businessmen who want to sell OilEx products can put up gas stations, because OilEx itself will not go into the retail business.

* * *

THE oil oligopoly should not win it all. But the reality is that neither could the OilEx marketing monopoly win it.

We were hoping that between the Big 3’s oil oligopoly and Garcia’s marketing monopoly would emerge a middle ground where the two extremes could meet and be willing to lose some, win some.

Petron, which has the biggest (37 percent) market share, said it was willing to consider the Pascual Formula. Garcia, however, said he doubted if it would work since, according to him, the problem of rising prices could be solved only by an all-or-nothing approach, not by entering into a compromise with the oil cartel.

Maybe it’s time that the people themselves, the final arbiter on public issues, spoke up.

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(First published in the Philippine STAR of July 4, 2000)

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