A number of House Bills (HB4550, HB4711, HB5172 and HB7928) have been filed in Congress that intends to repeal or amend certain provision of the Downstream Oil Deregulation Law (RA 8479).
With reference to the House Committee on Energy hearings on the subject matter, the Philippine Institute of Petroleum (PIP) has manifested the following points to the Congress:
- Local oil price movements follow the trend of international oil price movements. Street level pricing or retail pricing on the other hand, is ultimately determined by competition in the particular location as all retailers (dealers) will always want to stay competitive with neighboring retail stations. Healthy competition brings with it a natural check and balance.
- The Oil Deregulation Law (RA 8479) has brought tremendous benefits to the oil industry.
- The dominant market shares enjoyed by the so called big three oil companies pre-oil deregulation has now been broken up by the entry of numerous oil companies. As of 2019 data there are about 9,003 retails stations in the entire country. Of the total 9,003 retails stations, about 3,736 (41%) are oil majors and 5,267 (59%) are new players.
- Deregulation brought about competition which saw the introduction of better-quality products, better retail station facilities and services, innovative promotions and also intense price discounting. Consumers enjoyed increased power of choice.
- Deregulation lowered the industry’s barrier to entry and has given business opportunities to thousands of local entrepreneurs who have opened retail stations. This also saw the related growth of allied service providers like contractors, equipment suppliers and provided an efficient route to market for various non fuel products now sold in retail stations;
- Regulation and/or Price Control will always diminish the attractiveness of an industry and can discourage potential new investments. This can be from the opening of new retail station by entrepreneurs, job creation for service providers and even to the entry of new oil companies.;
- A deregulated industry brings about a more buoyant competitive market environment. It also stimulates investments and job creation. Consumers benefit from increased power of choice, better quality products and a safer and pleasant refueling experience.
The government should continue focusing on promoting more competition, attracting more new players, encouraging more innovations as this will ultimately redound to an even heightened competitive environment that will impact pricing and quality of products and services.
PIP’s Position on the Oil Price Movements
Below are some of the comments and position of PIP pertaining to oil price movements and competition:
- The weekly oil price movements announced by the downstream oil companies, whether an increase or decrease, will follow the trajectory of global/regional oil pricing as revealed in the Mean of Platts Singapore (MOPS). We deny the assertions that oil companies are quick to reflect oil price increases but is not too quick in reflecting price decreases;
- There are many factors that influence international oil prices. Primary will be supply and demand and geo-political tensions. The onset of the COVID-19 pandemic caused a global slump in demand thus oil prices went down significantly. Now that some countries are opening up, and economies starts recovering, demand for fuel is increasing thus we see increases in fuel prices;
- Given the deregulated nature of the industry, street level competition is the ultimate determinant of prices thus the retailers are given certain latitude to adjust their prices to match/beat competition in order to be competitive;
- Many oil companies, including members of the Philippine Institute of Petroleum has challenged the legality of DOE’s DC2019-005-008 that mandates the unbundling of pricing components. This goes contrary to the Oil Deregulation Law and it jeopardizes the oil companies many trade and marketing secrets. This will also cause the oil companies to violate their non-Disclosure agreements with their various suppliers of products and services;
- The pricing disparity in Baguio versus that of Rosario, La Union is influenced by many factors such as competition, cost of doing business and logistical considerations but is caused primarily by comparing Baguio prices to a location where intense price competition is happening (Rosario, La Union);
Technology Solution Retail Outlets (TSRO), are commonly known as Fuel Vending Machines that addresses the fuel requirement of locations certified by LGU’s to be catered by the “bote-bote” (soda bottles) trade.