Unbundling of oil prices studied – DOE

BAGUIO CITY  – The energy department is currently studying the unbundling of oil prices in the country to help determine whether or not there has been rampant over pricing in the sale of oil products nationwide.

Lawyer Rino E. Abad, officer-in-charge of the energy department’s oil industry management bureau, explained the primary reason for the reported high oil prices in Baguio compared to the very low oil prices in the lowlands is the absence of large-scale oil consumers that could spark competition among the industry players to offer lower prices that will entice them to patronize the firms offering low prices.

Abad pointed out that the consumption of Baguio in terms of oil is only 2 percent of the country’s total demand but 90 percent of the oil supply is consumed by motor vehicles which is a clear indication that there is no actual balance on the economics of scale that will trigger competition among the oil industry players to lower their prevailing prices for the benefit of most of the consumers.

The DOE official emphasized Baguio also lacks the import terminal and depot that play a vital role in the determination of the prevailing oil price in a certain locality compared to the present situation in San Fernando ?City, La Union where there are 4 import terminals and depots owned by oil companies that explain the obviously lower oil prices.

“We are studying the issuance of the appropriate regulations that will govern the unbundling of the oil prices so that the public will be able to understand the components of the oil prices and for the agency to determine whether or not there is actually over pricing done by oil companies in the different parts of the country,” Abad stressed.

According to him, the agency is currently working on how to unbundle the prevailing oil prices and the necessary regulations that will be crafted so that there will be transparency in the deregulated oil industry.

He added that if Baguio will have industries in the future, there will be a possibility that oil companies will eventually lower their prevailing prices to gain more access to the market because if the market will only be more vehicles, there is a tendency that oil prices in the city will remain high to the prejudice of the general public.

Earlier, local officials and residents complained on why are the prevailing oil prices in the city higher by P8 to P12 per litter compared to the existing oil prices in the lowlands.

However, oil companies reasoned out that the difference in oil prices in Baguio and the lowlands is actually caused by the transportation cost from their depot in La Union to the city and other intermittent factors that are included in the computation of the prices of gasoline, diesel, kerosene and Liquefied Petroleum Gas (LPG).

Abad assured consumers that the agency is doing its best to make people understand the situation of a deregulated oil industry which was adopted by the country primarily geared towards instilling competition among oil players to provide lower oil prices beneficial to the greater majority of the people.

By Dexter A. See

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