Pump price cap mulled as amendment to oil deregulation law

Published October 27, 2021, 3:15 PM

by Myrna M. Velasco

Setting a cap on weekly adjustments in pump prices is among the policy prescriptions of the Department of Energy (DoE) in the amendment to the Oil Deregulation Law, so government can help cushion cost impact on consumers when oil prices are surging in the world market.

When asked on the DOE-proposed amendments to Republic Act 8479 or the Downstream Oil Industry Deregulation Act, Atty. Rino Abad, director of the department’s Oil Industry Management Bureau (OIMB), indicated that the specific proposals have yet to be fleshed out with the lawmaker-members of the House Committee on Energy.

Primary proposals being discussed include fuel cost unbundling. The ‘pump price capping’ is another policy intervention being contemplated upon from DOE’s fence.

Abad, nevertheless, qualified that given the ‘deregulated state’ of the oil industry, there will be challenges in instituting these proposed policies, hence, these would still need deeper study by the department.

On fuel cost unbundling, in particular, he noted that “unlike in the power industry, in which there’s just one franchise holder for several areas and the itemized pricing can just be implemented by that particular distribution utility across its service areas — in the case of the deregulated oil industry, there might be a need to unbundle or segregate cost items for thousands of gasoline stations operating all over the country.”

Abad explained “the predicament would be: there is no single pricing that can be enforced in one area – in fact, even in just one city, the prices of the oil companies could differ because of market competition.”

For instance, it was cited that in Fairview in Quezon City where there are relatively fewer gasoline stations, diesel prices could still be in the range of P55 to P57 per liter; but when a motorist reaches high-traffic areas like Philcoa or North Edsa, the prices are higher at P62 to P69 per liter.

In 2019 the DoE issued its Circular mandating the oil companies to unbundle or itemize the various cost components they are passing on to consumers at the pumps. But, industry players questioned that rule in the Courts, resulting in the issuance of temporary restraining order (TRO) and successive injunction against the policy.

Already, oil firms have emphasized that the proposed fuel unbundling edict will unduly compromise ‘trade secret’ and information that are seen detrimental to their operations and conduct of business in a deregulated industry.

By far, the DOE wanted four components to be segregated, including: international cost; taxes and duties; the biofuels component in fuels; and then the “oil company take” portion that shall include their operating costs and actual profits.

For the international cost elements, the itemized components shall be: import cost for both crude and finished products; freight cost, insurance and foreign exchange rate; while on taxes and duties, that must factor in import duties, excise taxes, value added tax and other imposts.