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DoE to require transparency on markups charged by oil firms

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gas pump fuel markup

THE Department of Energy (DoE) hopes to issue by the first quarter a circular that will require oil companies to submit a breakdown of the costs that go into the pricing of petroleum products, including the so-called “industry take” that discloses their mark ups.

In a draft circular, the DoE said it will also impose a penalty on those that fail to comply with the provisions of the circular, which include a timely announcement of oil price adjustments.


Rino E. Abad, director of the DoE’s Oil Industry Management Bureau (OIMB), told reporters last week that the agency would schedule a second public consultation to discuss the draft circular.

“So we will really do this process within the first quarter,” he said. “Lahat naman ng items (All the items) there will be debated thus the second public consultation.”

Mr. Abad said the proposed circular has eight major components. He said the DoE had obtained the consensus of the oil companies on seven of them.

“What we are discussing is only industry take,” he said.

He said industry take is a contentious issue for the companies as this covers their profit margin and operational costs.

Based on the draft circular, the oil firms are required to “strictly comply with the submission of the formal notice of price adjustments per liter for liquid fuels and per kilogram for LPG (liquefied petroleum gas).”

The submissions should contain the computation and the corresponding explanation of the unbundled cost items of all products subject for sale.

The required computation covers the price movement for both the international content and the local content of the fuel products. International content covers the product cost, freight cost, insurance and foreign exchange rate. Local content should enumerate taxes, biofuel cost and the industry take.

The fuel products included in the circular are gasoline, automotive and industrial diesel, kerosene, jet fuel, bunker fuel oil, and household and automotive LPG.

The DoE may require retail outlets to submit to the OIMB an unbundled computation with corresponding explanation of the retailers’ price of all petroleum products sold in a specified period.

The draft circular also calls for oil companies to notify the DoE not later than 3:00 p.m. of every Monday of the week for any price adjustment — increase, decrease or no adjustment — and prior to any public announcement and implementation.

For LPG, they are to notify the department not later than the end of every month for any price adjustment before any public announcement and implementation.

“For the purpose of establishing uniformity in the timing of price adjustment across the whole industry thereby avoiding any confusion among the stakeholders and consumers, the price adjustment for liquid fuel shall be implemented beginning every Tuesday of the week, and applicable for the whole week (from Tuesday to the next Monday) and for LPG, beginning every first day of the month and applicable for the whole month,” the proposed circular states. — Victor V. Saulon