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Philippine Daily Inquirer: Palace tells gas firms to explain price hikes

Christine O. Avendao and Jamie Alarcon
Feb 13, 2006
MALACAYENANG WANTS oil firms in the country to justify their new round of price increases in the wake of record profits that global oil companies are reaping.
President Macapagal-Arroyo has directed the Department of Energy to ask oil firms to give a “written explanation” on why they had raised prices, Press Secretary Ignacio Bunye said yesterday.
“We must ensure that there is a clear justification for such increases in accord with the situation in the world market,” Bunye said.
The increases came despite the strengthening of the peso against the dollar.
Pilipinas Shell Petroleum Corp., Caltex Philippines Inc. and Petron Corp. led other oil firms in jacking up the prices of gasoline, diesel and kerosene by 50 centavos per liter over the weekend.
The oil firms cited high international prices and competitive market forces as reasons for the adjustments.
Since January, oil firms have raised the prices of gasoline, diesel and kerosene three times by a total of P1.50 a liter. The price of LPG has also risen three times by P1.61 per kilogram or P17.71 per 11-kg cylinder.
The adjustments were apart from those brought about by the increase in the value-added tax from 10 percent to 12 percent on Feb. 1.
The price of unleaded gasoline went up by 70 centavos per liter and that of diesel by 60 centavos per liter as a result of the 2-percentage-point increase in the VAT rate. The price of LPG rose between P8.90 and P9.80 per kg.
Cooperate
In a text message, Bunye said the Palace expected the oil companies to cooperate “in the spirit of transparency.”
“We know they (oil firms) are deregulated, but it should not prevent the executive from making this initiative in the public interest,” he said.
Energy Secretary Raphael Lotilla said the President conveyed her instructions to him yesterday morning when she was informed about the oil price increases.
“(The President) inquired whether we do that (seek explanations from oil firms) and we said yes,” Lotilla said in a phone interview.
The energy secretary said oil firms had been told to make the written explanations. They will be given a few days to submit them.
Strong message
Since the start of the year, the DOE has asked the oil firms not to immediately increase prices in one blow after global oil prices went up in December last year. Instead, the companies were asked to adjust prices in increments.
Presidential Chief of Staff Michael Defensor described the Palace demand for an explanation from the oil companies as “a strong message” from the President.
While Malacaang recognized the oil firms' logistical requirements in importing, processing and bringing out oil, “they also have to recognize the fact that the President is vigilant in protecting our people, particularly the riding public,” Defensor said.
“Any increase (in oil prices) to the detriment of our people will be closely monitored,” he said in a phone interview.
The high prices not only in the Philippines, but also in other parts of the globe, are giving the big oil companies record profits.
Texas-based Exxon Mobil Corp., the world's largest publicly traded oil company, surpassed Wall Street expectations when it reported $10.7 billion in fourth quarter profits on Jan. 30.
Biggest profit in US history
Exxon's profit of $36.1 billion for all of 2005, which rose 42 percent from 2004, was the largest annual net income of any corporation in US history. The amount was bigger than the economies of 125 countries.
Industry critics have called for a tax on excess profits following Exxon's disclosure of its record net income.
The previous week, California-based Chevron Corp. reported annual profits of $14.1 billion, up from $13 billion in 2004. Chevron owns Caltex Philippines.
Pilipinas Shell's earnings soar
Royal Dutch Shell announced on Feb. 1 that it earned $5.4 billion in the last quarter of 2005. Analysts said Shell's profit for the entire year, $22.94 billion, an increase of 30 percent from the previous year, was a record for a company listed in the United Kingdom.
It was not known how much of this amount was contributed by its local subsidiary, Pilipinas Shell Petroleum Corp. But as early as June 2005, Pilipinas Shell had already earned P2.87 billion, almost matching its earnings of P2.98 billion for the entire 2004.
Another of the Philippines' top oil firms, Petron, surpassed its net income target for 2005 by the third quarter. Petron reported P4.8 billion in profits from January to September, exceeding its P3.6-billion net income target for the year by almost P1 billion.
It attributed its earnings to the lucrative export market, while Pilipinas Shell cited better refining margins and nonfuel retailing revenues, such as those derived from its Select convenience stores.
Bunye said the series of oil price increases “should serve as a constant reminder to all sectors-public and private-of the need to conserve our precious fuel.”
He said Malacaang would continue to step up its efforts to search for alternative energy sources.
Bunye called on Congress to immediately act on pending energy bills, “including the one providing incentives for the production of ethanol and biodiesel.”
His call was similar to the one made by US President George W. Bush in his State of the Union speech on Jan. 31. Bush proposed funding additional research into alternative energy sources because America needed to stop being “addicted to oil” from the Middle East.
The Philippines imports most of its oil requirements from the Middle East.
Biggest importers
Four oil companies-Caltex, Shell, Petron and Total-made it to the top 10 importers in 2005 based on the amount of customs duties and taxes they paid, according to the Bureau of Customs.
The only government office to make it to the list was the National Food Authority, which ranked second. Toyota Motor Philippines Corp. took the top spot.
But the companies' contributions were hardly enough to help the bureau meet its target collection last year as it struggled to come up with P151 billion in cash for most of 2005.
The BOC, which was headed by three different commissioners last year, only met, and slightly exceeded, its 2005 target after it was allowed to count non-cash collections as part of its revenue.
Toyota paid P10.79 billion in duties and taxes last year, while the NFA paid P10.23 billion, according to bureau figures.
The rest of the top five slots were occupied by the three big oil companies. Third was Caltex Philippines, which paid P7.68 billion; followed by Pilipinas Shell, P7.39 billion, and Petron, P5.28 billion.
Nestl Philippines ranked sixth with P2.66 billion in customs duties and taxes paid. It was followed by Isuzu Philippines (P1.91 billion), Total Philippines (P1.71 billion), Fortune Tobacco (P1.60 billion) and Ford Group Philippines (P1.38 billion). With a report from Leila B. Salaverria
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