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HOME > Selected Writings > Youngblood > Oily conspiracy (29 June 1995)

What does it take to be anti-GATT?6 Dec 94
The tolling of the bells22 Dec 94
The other wonder of Boracay12 Jan 95
Growing up on comics26 Jan 95
Slippery reality9 Feb 95
The politics of loving14 Feb 95
Election illusion21 Feb 95
Taxing situation14 March 95
What�s wrong with oil deregulation?27 May 95
The truth about oil price hikes13 June 95
Oily conspiracy29 June 95
Why there should be a rollback instead6 July 95
From GATT to OGRE30 Sept 95
The economics of Christmas28 Dec 95
The Best of Youngblood (1998)

Oily conspiracy

Danilo Ara�a Arao
Philippine Daily Inquirer (Youngblood), 29 June 1995, p. 7

Aruta, J., Doyo, C., & Magsanoc, L.J. (1998). The Best of Youngblood. Pasig City: Anvil Publishing, Inc. 199-201.

I'VE been having sleepless nights lately, and I think it's bound to continue until the morning of July 3 when the Energy Regulatory Board (ERB) resumes public hearings on the oil companies' petition for a price increase.

Based on what happened in the June 15 public hearing, it appears that the government has already made up its mind to increase the prices, and it's just a matter of how to make it more acceptable and "less painful" to the people.

How the government would be able to pull it off is anybody's guess. Some administration officials have been talking about raising only the prices of fuel oil and LPG since these are the two most heavily subsidized petroleum products.

This may be true, if we consider the fact that oil companies make OPSF withdrawals amounting to P1.65 per liter of fuel oil, and P2.25 for every kilogram of LPG sold. So theoretically, if we increase the wholesale posted price (WPP) of these products to, say, P2.50, then there will be no more OPSF withdrawals, and the companies will instead end up contributing to the fund. (We get the WPP by adding three variables: direct company recovery, specific tax, and the OPSF impost. If the latter is negative, then OPSF withdrawals are being made. So increasing the WPP could yield either a zero or positive value for the OPSF variable.)

But things are not that simple and we should not be misled by government propaganda. LPG has the largest direct company recovery (DCR) for the oil companies, amounting to P6.51 per liter. The DCR includes the landed cost, refining, distribution, marketing/advertising and most important, the profit margin. (Obviously, the profits the companies make on every liter sold is a well-kept secret, so we can only surmise how much they make from LPG.)

We don't need to mention here the added woes to consumers if the prices of LPG and bunker fuel are raised. Most households depend on LPG for cooking. Those living in Luzon and Bohol also need to worry about power rate hikes, since the grids there are heavily dependent on oil-based power plants.

Government has also failed to mention the duty and tax elements of petroleum products. More than 50 percent of the prices of petroleum products goes to the government in the form of taxes and duties. In the case of LPG, duties and taxes constitue 45.09 percent of the price, and 82.37 percent of the price of fuel oil. (During the June 15 hearing, an ERB official berated me for making an erroneous computation. Imagine his surprise when I told him that I simply just got the information from his office.)

This brings us to the claim of opposers that scrapping all these taxes and revoking the 33-centavo per liter increase in netback given to oil companies in August 1994 would result in a rollback. BAYAN and the People's Coalition Against Oil Price Increase (CAOPI) are being too kind in calling for a P2 per liter rollback. Why? The three oil companies will still generate hefty profits, especially if they reduce current expenses on marketing and advertising and minimize their business expansion.

At present, the DCR amounts to an average of P4.18 per liter. If this were to be cut to P2.18 per liter, the three oil companies would still get P108.56 million per day, or P3.26 billion monthly. Going by their respective market shares, this means that Petron would earn P1.37 billion a month; Shell P1.11 billion; and Caltex, P782 million. I know a lot of industrialists who would kill just to have such earnings in a month's time, but I guess the three oil firms are quite an insatiable lot.

The ERB isn't issuing any provisional increase for now. But things could turn out differently after July 3. It is possible that the government will grant the increase even while public hearings are going on, and revoke it later in the unlikely event that it is found to be unjustified.

As for the scrapping of oil taxes, the ERB has already said that it is beyond its authority and "expertise." Their duty, ERB officials say, is simply to decide on the validity of oil price hikes. Thus the ERB can't be expected to bother with such issues as the foreign exchange cover and OPSF mismanagement, among others.

BAYAN and the CAOPI did the right thing to focus their protest actions on Malaca�ang and the offices of oil firms, since the ERB is nothing but a pawn (or a puppet) in the oily conspiracy between the government and the oil firms. There's no point in rallying at the ERB office, unless you only want media projection or you're just simply kulang sa pansin. Oops, may tinamaan ba?

Anyway, it's late at night and there's still work to do in the morning. I may file a leave of absence on July 3 just so I can stay at home and get the peaceful slumber I deserve. I plan to cut all communications with the outside world, and then just brace myself for the worst.

Things couldn't possibly get any better. There's still the deregulation of the oil industry to worry about. Full deregulation is supposed to start in 1997 and the automatic pricing scheme is awaiting legislative approval.

Danny Arao, 26, teaches Journalism at the University of the Philippines in Diliman.

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