DOE, mayor to probe high fuel rate in Baguio

Retailers deny hand in price manipulation 

By Aileen P. Refuerzo

BAGUIO CITY – Mayor Mauricio Domogan and Dept. of Energy Oil Industry Management Director Rino Abad on Wednesday agreed to probe the big disparity in the prices of fuel here as compared to the lowlands like La Union. This as local fuel retailers on Thursday denied having a hand on the price discrepancies and belied suspicions that their manipulation and profiteering caused the cost gaps placed at P10 in gasoline and P8 in diesel based on comparative prices in Baguio and in La Union.

In a dialogue called by the DOE, operators of Caltex, Petron and Shell retail stations said their charges were based on the suggested retail prices dictated by their mother companies and that they do not have knowledge on the level of the “industry take” or the mark-up they were supposed to be imposing on their products.

Abad cited records that industry take figures in the City in the last 2.5 years were much higher than those in La Union and even Metro Manila which he said is “abnormal” and astonishing.

   Baguio’s industry take figures were P2.75 for gas and P1.55 for diesel whereas in La Union it was only 96 centavos and 45 centavos, respectively and in Manila even decreased by 38 centavos for gas and 45 centavos in diesel.

He stressed that the P2.75 mark-up in gas was even higher by 10 centavos than the excise tax imposed.

Abad also debunked claims that the cost disparity was caused by distance as they determined that the transport cost from La Union to Baguio only amounts to 18 centavos per liter; and fuel contraction due to change in temperature presenting evidence proving otherwise.

He urged the retailers to cooperate to counter attempts to shift back to regulating the oil industry now being floated with the ongoing hearing at the House of Representatives.

He also announced moves by the department to make the unbundling of prices by the retailers a mandatory requirement.

He said he himself concluded that the price difference occurred in the local level after oil companies informed that their intervention on the costs ends in the La Union depot where their SRPs are being set.

However, the retailers insisted that they are highly dependent on decisions from their central offices and could not have resorted to “predatory pricing” as they do not have the “right” to change the prices.

Mayor Domogan appealed to the retailers no to take advantage of the price deregulation law and to impose just the fair price.

“We do not want you to suffer losses in your businesses but please be fair as any layman could see that the mark-up cost is just too much,” he said. 

The dialogue came on the heels of big oil companies’ imposition of a big-time price drop in the costs of gasoline (P5-6) and diesel (P1.50-P2) here beginning last Monday which Abad attributed to the on-going efforts of Baguio Rep. Marquez Go who initiated an inquiry before the House of Representatives and consultations with the oil players.

Abad sought out City officials Wednesday after the mayor and the City Council expressed dissatisfaction over the DOE’s earlier justifications attributing the price gap to the distance in transporting fuel to the City and sought further explanation. 

He said other factors contributing to the disparity include the weak demand in the Cordillera Administrative Region which he said is only at two percent of the entire Northern Luzon. 

Whereas Region 1’s demand is at 14 million barrels, CAR’s is only 150,000 barrels, he said adding that 90 percent of the demand go to retail which make it hard for the players to offer lower prices.

Moreover, he cited the region’s lack of an oil depot, terminal, refinery and similar big facilities.

He also cited the oil deregulation law which restricts the DOE from promptly acting on price abuses.  

But Domogan said these factors should not be made as an excuse to jack the price at exorbitant levels.

“If we have low demand, does it follow that they can jack up the price all they want?,” the mayor asked as he urged the DOE to help address the City’s situation.

“There is the deregulation law and we are okay with that but please make sure that the prices are fair and reasonable in all areas,” he said.

Abad said they have the power to investigate cases like what is happening in the City which could help address the problem.

He agreed to present the matter to the Regional Development Council in one of its meetings.