Brutal greed
During past price spikes, major oil multinationals posted record windfall profits in the billions while consumers absorbed the pain.
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Daily TribuneDuring past price spikes, major oil multinationals posted record windfall profits in the billions while consumers absorbed the pain.
Why should the obscenely rich oil companies be spared from the effects of the global catastrophe, which is the rocketing prices of fuel as a result of the Middle East conflict, while ordinary Filipinos are crippled by its impact?
It is not even a secret that these monoliths often hold 15 to 30 days of stock bought before the global price spikes. The oil deregulation law provides them with a cloak of protection under replacement pricing, which means old fuel is sold at Middle East wartime levels.
Companies hold roughly one month’s commercial stock plus 50 days of strategic reserves. A voluntary, temporary partial absorption of the price pain, like half of the current hike, would not bankrupt them.
It would, however, provide immediate breathing room for public utility drivers, agricultural operators and low-income commuters who are seeing their budgets dissipate daily.
Instead of launching targeted rebates, fuel vouchers, or sector-specific discounts through public-private partnerships, these oil giants limit their gestures to minor CSR programs and promos that barely dent the overall burden, from which they even gain through tax shelters.
During past price spikes, major oil multinationals posted record windfall profits in the billions while consumers absorbed the pain.
In the Philippines, even “modest” margins, when multiplied across millions of liters, translate into sustained earnings.
Protecting profit streaks apparently outweighs the human cost of families skipping meals and drivers parking their vehicles.
Then there’s the deviousness of transfer pricing, where multinationals increase overall profits while local subsidiaries appear to operate on thin margins.
It erodes the intended benefits of deregulation from competition and efficiency.
The global petroleum overlords go to great lengths to hide the transfer pricing component by blocking efforts to unbundle costs in fuel bills, similar to the practice in monthly electricity bills.
Under the scheme, multinationals and their local affiliates artificially inflate the landed import cost component of the replacement-cost pricing formula, the mechanism that determines weekly pump prices under the 1998 Oil Deregulation Law or Republic Act 8479.
Under domestic laws and global norms, oil product prices should match what unrelated parties would pay in the open market.
In practice, however, oil majors can set internal prices for crude or refined products shipped to local affiliates that are higher than market prices.
Roughly 67 percent of global oil trade occurs through term contracts among subsidiaries of the same companies, bypassing transparent spot markets like the Mean of Platts Singapore. These padded internal prices become the effective cost reported.
Local subsidiaries then pass the higher cost to consumers at the pump under the weekly adjustment system, even if the real economic cost to the global group is lower.
Profits are shifted upstream or to low-tax jurisdictions where the parent company or trading hubs are domiciled, while the Philippine consumer absorbs the padded price.
Thus, price increases hit consumers immediately and fully when global prices rise, while rollbacks are slower, partial, or nonexistent.
Government, meanwhile, never lifts a hand to halt such corporate abuses on Filipinos, who are left in the lurch.
