Slick with oil profit

Slick with oil profit | Daily Tribune

The industry’s pathetic defense is “replacement cost,” or pricing fuel based on what it would cost to restock at current global rates, not what was actually paid.

It is a tidy but predatory business model in theory and highly profitable in practice. Prices rise quickly when global costs go up. When they fall, adjustments are slower, more cautious, and sometimes nonexistent.

This is not by accident. That system dates back to Republic Act 8479, the Downstream Oil Industry Deregulation Act of 1998, which removed government control over pricing, dismantled the Oil Price Stabilization Fund, and promised that competition would protect consumers.

Competition did come. So did synchronized price movements by the fuel cartel members. Oil firms adjust almost in unison, and always with speed when prices rise.

Want proof?

There’s a chart making the rounds online that lays bare the distortion. While most Asian neighbors saw diesel price increases ranging from single digits to roughly 40 percent, the Philippines’ price nearly doubled, an eye-watering surge approaching 97 percent.

That gap cannot be explained by global prices alone, which are shared across the region. It points instead to how prices are set domestically: a deregulated system that allows oil giants to price forward, pad margins and pass on hypothetical costs rather than actual ones.

When your increase is nearly twice that of your peers, the market is no longer merely reacting — it is extracting. Cha-ching!

Meanwhile, the government has had little room to intervene beyond subsidies and tax adjustments. Price ceilings are off the table. The market decides, and the consumer absorbs.

And yet, Malacañang insists there is no oil crisis, only a “price disruption.” That may be true on paper — supply remains intact — but for motorists paying P100-plus per liter, the distinction is meaningless.

Yes, the trigger is external.

The conflict in the Middle East has pushed global oil prices past $100 per barrel, with the Strait of Hormuz — through which about 20 percent of global supply flows — under strain.

But the Philippines does not just experience oil shocks. It amplifies them.

The country imports about 98 percent of its crude oil. That dependence leaves little buffer. Price movements abroad translate quickly to higher costs at home, and local pricing practices only sharpen the impact.

The government response has been familiar: subsidies for transport and agriculture, a suspended jeepney fare hike, and a proposal to grant the President emergency powers to adjust fuel taxes. There is also a VAT exemption on indigenous natural gas.

These measures ease pressure, but they are temporary. They manage the impact, not the exposure.

Oil shocks are not rare events. They recur often enough that treating each one as an emergency is no longer sufficient. Yet policy remains reactive — rolled out when prices spike, withdrawn when they stabilize, then revived when the cycle repeats.

A more durable approach would focus on insulation: larger strategic reserves, diversified supply sources, and a faster transition to alternative energy. Progress has been uneven.

Renewable energy is expanding, but not at a scale that significantly reduces dependence on imported fuel. Domestic exploration remains limited. Reserves are modest, if you can call 60 days that.

The result is predictable. Higher transport costs, rising food prices, pressure on the peso and reduced purchasing power. The cycle holds because the structure has not changed.

This brings the discussion to leadership. President Ferdinand Marcos Jr. has chosen a steady tone. No crisis, only disruption. There is value in that.

Markets react to panic, and restraint has its place. Still, steadiness is not a substitute for strategy.

The continued reliance on emergency powers raises a basic question: if oil shocks are recurring, why is the response still temporary?