The recent series of petroleum pump price rollbacks are welcome but independent think-tank IBON Foundation believes that oil firms should be transparent with their pricing particularly in the wake of windfall profits earned by oil firms due to record-high world crude prices.
According to research head Sonny Africa, how the oil firms determine pricing and the amount of rollback remains a mystery. Unless these firms reveal their pricing structure, the public remains captive to the whims of oil companies and dependent on the government’s “moral persuasion”, he added.
IBON pointed out that because of the practice of transfer pricing by global oil firms, it has become increasingly difficult for the Department of Energy and other stakeholder groups to determine how much local pump prices should move in relation to global oil prices and the peso-dollar exchange rate. Through transfer pricing, oil transnational firms are able to artificially bloat the price of oil as it passes through the different stages of production and distribution chain which they control.
IBON further pointed out that global oil prices whether Dubai spot crude or Mean of Platt’s Singapore , which are the benchmark that oil firms use in determining local pump prices, are unreliable as they are bloated by speculation. A 2006 study by the US Senate showed that 30% or more of world crude oil prices are driven by speculation. Locally, IBON estimates that prevailing pump prices of unleaded gasoline are overpriced by 23% because of speculation.
Oil firms have been allowed to further achieve monopoly control over the industry because of deregulation, which makes urgent the need for government regulation and control over the local oil sector to help ensure transparency in pricing, said Africa .