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OIL PRODUCTS OVERPRICED BY 91 CENTAVOS PER LITER
by IBON
Tuesday, Feb. 24, 2004 at 11:49 AM
editors@ibon.org
IBON Foundation calls the recent rounds of oil price hikes as “extremely unjust” because oil companies overpriced their products by at least 91 centavos per liter last year.
IBON Foundation calls the recent rounds of oil price hikes as “extremely unjust” because oil companies overpriced their products by at least 91 centavos per liter last year.
From December 2002 to December 2003, the value of the peso against the dollar weakened from P53.50 to P55.40. Meanwhile, Dubai crude prices jumped from $25.70 per barrel to $28.10 per barrel during the same period.
The rule of thumb or ROT for the downstream oil industry says that a one-dollar adjustment in Dubai crude prices affects local oil prices by 26 centavos. Similarly, a one-peso movement in the foreign exchange affects domestic oil prices by 13 centavos.
Using the ROT, the ideal price hike in 2003 should only be 87 centavos per liter but actual price adjustments in the average retail price translated to an increase of P1.78 per liter. Oil firms thus exceeded the price adjustment limit by 91 centavos per liter.
Oil companies have been taking advantage of the Oil Deregulation Law that allowed them to automatically adjust prices based on changes in foreign exchange rates and world crude prices. Government argues that such policy would encourage competitive pricing but in practice, deregulation only gave more room for oil firms to manipulate prices.
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