There’s no collusion and overpricing by oil companies in the Philippines, according to the Independent Oil Price Review Committee, headed by former Budget Secretary Benjamin Diokno PHOTO BY RICK ALBERTO
MANILA, Philippines—A group that claims to be independent of the oil companies has cleared them of accusations of overpricing and collusion, saying there has been no “extraordinary” movements in pump prices in the country nor have there been exorbitant profit margins over the past years.
Benjamin Diokno, a former budget secretary and head of the Independent Oil Price Review Committee (IOPRC), said on Wednesday that a five-month study showed that local fuel price adjustments mirrored the movements of prices in the global market, while oil companies’ profits were deemed reasonable in relation to other industries.
The committee is a seven-member team of representatives from various sectors, including economists, academicians and consumer rights advocates, who took on the task voluntarily.
The oil companies’ rate of return, according to Diokno, was even lower than in other sectors.
“Oil deregulation resulted in a lower average return on equity of three major oil companies. Average ROE was estimated at 23 percent during the regulated regime (limited to 1994 to 1996), which was much higher than the average ROE at 13 percent under the deregulated regime,” Diokno said.
While the study cleared local oil firms of allegations of overpricing and collusion, the IOPRC put forward several recommendations it said would ensure that the “public is not being shortchanged in terms of quantity and quality,” Diokno added.
The suggestions include:
• The government should continue to support the oil deregulated regime on the premise that greater responsiveness of local pump prices to world oil prices and a lower and less volatile ratio of local pump prices to world oil prices are desirable goals.
• In keeping with the spirit of transparency and fiscal responsibility, the government should resist any temptation to subsidize fuel and electricity consumption.
• The government should review the possible deregulation of the land transport sector since the regulated regime of the transport sector prevents it from adjusting fares to immediately compensate for rising fuel prices.
• The Department of Energy (DoE) should continue to actively monitor oil companies and ensure that they effect reasonable and fair changes in pump prices in response to changes in their input prices.
• The DoE should step up its task of monitoring oil companies and ensure they effect reasonable and fair changes in pump prices.
• The DoE should require oil companies to submit their audited financial statements annually and, correspondingly, build a staff of industry financial experts.