Overpriced Oil

Recto gives basis for claim of overpricing by oil firms Socioeconomic Planning Secretary and National Economic and Development Authority (NEDA) Director-General Ralph G. Recto explained over the weekend his recent statement that oil prices are higher than what the actual price should be. Recto just arrived the other night from a joint International Monetary Fund- World Bank meeting in Washington, DC. Recto said that based on the Oil Monitor of the Department of Energy (DoE), oil companies were charging as of April 16 as much as P40.85 per liter of premium plus unleaded gasoline, P39.71 per liter of premium unleaded gasoline, and P39.07 per liter of unleaded gasoline, about P8.00 more than the estimated gasoline price of P32. “Assuming that oil companies had purchased their stock of Dubai crude at US$50/bbl or P2,408/bbl based on an exchange rate of P48.16 to the dollar at that time, then pump prices of domestic gasoline should be about P32.16,” Recto said. “However, if they had purchased Dubai crude oil in February or March as some of them keep an inventory of 30 to 60 days, then prices should even be lower.,”, he added. Dubai crude was at US$42.21/bbl or P2,024/bbl (P47.96 to US$1) as of Feb. 20, and US$44.51/bbl or P2,149/bbl (P48.29 to US$1) as of March 20. Quoting historical data to estimate the P32.16 price, the socioeconomic planning secretary noted that when Dubai crude was at P2,176/bbl in February 2005 (US$39.70/bbl at P54.81 to US$1), domestic gasoline was at P27.37 per liter while at P2,495/bbl (US$45.84/bbl at P54.44 to US$1) in March 2005, domestic gasoline was at P29.22. “Thus, interpolating the cost of domestic gasoline at P2,408/bbl given the above Dubai crude and pump prices, it would be at P32.16,” Recto explained. He further observed that even the most expensive gasoline in the United States which is the premium reformulated retail gasoline cost US$2.343 per gallon or P29.57 per liter at P47.77 to US$1 as of April 20 (one gallon is equal to 3.785 liters). “Government may not have the tools to lower oil prices under the deregulation law and therefore must collect the appropriate taxes from the oil companies so we may make the necessary investments for health, education, social protection to help the poor as well as in renewable energy,” he said.