To sort out pricing

The Department of Energy (DOE) is pushing for new amendments to Republic Act 8479 or the Downstream Oil Industry Deregulation Act – and the specific agenda this time is to define “fair pricing adjustment” at the retail pumps.

In a budget hearing in Congress, DOE Assistant Secretary Leonido J. Pulido III disclosed that the department is “collaborating with the Philippine Competition Commission precisely because the Oil Deregulation Law failed to define what is unfair or unjust pricing – and that’s one of the challenges that the DOE is facing when it comes to monitoring prices.”

For that reason, he noted that the DOE already sat down with the Committees on Energy of both the House of Representatives and Senate on proposed modifications to the law.

“The DOE has committed to submit a draft bill to hopefully amend the provisions of the Oil Deregulation Law. We are ready to submit the draft bill, we’re just doing a final check and final stakeholders’ consultation before we submit it to Congress,” Pulido said.

In particular, Marikina Representative Stella Luz A. Quimbo quizzed the DOE on possible collusive acts of the oil companies relating to the weekly price adjustments that they have been implementing.

But Energy Secretary Alfonso G. Cusi argued “the industry is deregulated, so the price is really dependent on the supply and demand situation and our price is dependent on global market.”

The DOE chief nevertheless conveyed that the department is very much aware of the fact that the oil companies have been buying fuel commodities from various suppliers “at different prices, different times and different conditions and that is the reason why we wanted to unbundle the price to really find out.”

But as the implementation of that policy had been impeded by temporary restraining order (TRO) from the Courts, the department had its hands tied down in getting it enforced upon the market players.

Quimbo primarily questioned the uniform price adjustments being advised by the oil companies on a weekly basis – and why their usual reference for such is the Mean of Platts Singapore or MOPS.

She thus recommended that instead of carrying out these weekly price adjustments, the oil companies must scrap MOPS as a pricing reference and they should also be allowed to effect price changes as often as possible so these could really be reflective of price movements in the international market.

Quimbo opined the unvarying use of MOPS as a pricing reference may have been conjuring up pricing collusion among the oil firms when it comes to their weekly cost movements.

“The formula (the use of MOPS as pricing reference) itself may be the source of collusion. The oil companies must be allowed to change prices anytime on the basis of actual cost and not on the formula,” the lawmaker stressed.

Cusi said the energy department is willing to sit down with the Marikina lawmaker so they can sort out the concerns relating to pricing parameters in the deregulated oil market.