THE House of Representatives on Monday scrutinized the country’s oil pricing system after lawmakers raised concerns that consumers are hit quickly by fuel price increases even when existing inventories were purchased at lower costs—a pattern viewed as unfair during periods of global volatility.
At the House Legislative Energy Action Development (LEAD) Joint Committee hearing, presiding officer Marikina City Rep. Miro Quimbo raised what he described as the most basic question Filipinos are asking.
“Very, very simple lang ang tanong parati ng ating mga kababayan. Bakit binili po ninyo bago mag-giyera at $60 per barrel … Bakit ‘pag binibenta ninyo after the war ay doble ang presyo? Ano ba ang dahilan diyan? Palinawagan niyo po kami kung bakit nagkakaganyan,” Quimbo said.
In response, Raphael Capinpin, representing the Philippine Institute of Petroleum (PIP), said local pump prices are not based on the cost of existing inventory but on global price movements and the cost of replacing supply.
PIP is an association of businesses operating in the downstream oil industry, including Petron, Shell, and Chevron or the so-called “Big 3”.
Capinpin explained that the Philippine oil industry follows a “week minus one” pricing system, where companies take the five-day average of global prices from the previous week and compare it with the five-day average from the week before, with the difference applied to current pump prices.
He added that companies use “replacement cost pricing” to ensure they can continue buying fuel at current international prices.
“Replacement cost pricing is not invented here. It’s an accounting practice, current cost of accounting, current cost of supplies, it is used for commodities. It is to ensure that you are able to buy replacement for the stocks that you sold,” he said.
Quimbo translated the explanation into everyday terms, likening it to a small retailer forced to adjust prices to avoid losses.
“Kumbaga sa tindahan, bumili ka ng bigas sa P45 per kilo pero naging P80 na ang presyo sa merkado, kaya kailangan mong mag-adjust dahil hindi ka na makakabili ng panibagong supply kung ibebenta mo pa rin sa P45,” he said, to which Capinpin replied, “Correct, Your Honor.”
Quimbo, however, emphasized that while supply continuity is important, consumers should not shoulder the full impact of sudden price spikes.
“So that’s why replacement cost assures somehow a level of inventory. High prices is a very big problem. Pero ‘yung scarcity meaning mas mabigat na problema. ‘Yun ang sinasabi natin, tama?” Quimbo said, to which Capinpin again responded in the affirmative.
Providing broader context, lawyer Jose Layug, representing the Philippine Energy Research and Policy Institute (PERPI), said the pricing system follows a long-established formula under Republic Act No. 8479, or the Oil Deregulation Law.
“So ‘yung paggalaw po ng presyo ng langis ever since our time, even before our time, ay week-on-week basis,” Layug, who once served as undersecretary at the Department of Energy (DOE), said.
According to Layug, pump prices are based on global benchmarks such as the Mean of Platts Singapore and adjusted using weekly averages.
“So halimbawa po ‘yung movement for tomorrow, ‘yan po ay a result of the oil prices last week compared to the previous week. ‘Yun na po ang nakagisnan ng DOE and in coordination with the oil companies and the transport sector, ‘yun po yung tinitingnan namin every week,” he said.
Layug added that the DOE monitors price movements and calls out companies when adjustments fall out of expected ranges.
“So kung hindi akma doon sa calculation ng DOE, tinatawagan naman nila ang oil companies at sasabihin kulang po ‘yung pagbaba,” he said.
Still, Quimbo pointed to a persistent public perception that price increases happen faster than rollbacks, a pattern lawmakers said continues to raise fairness concerns.
“Ibig sabihin itong rollback, bakit ang obserbasyon ng mga kababayan natin kapag nagtataas ang bilis, pero kapag bumababa ang bagal?” he asked.
Layug said price movements follow a formula but noted that competition varies across locations.
He explained that prices tend to be similar among stations located close to each other, as they monitor and adjust against competitors in the same area, but prices differ across regions and locations.
For lawmakers, however, the issue goes beyond formulas and technical explanations, with members emphasizing that the pricing system must ultimately work in favor of consumers.
Quimbo stressed that the real test of the pricing mechanism is whether it is fair and responsive to the needs of ordinary Filipinos, especially during periods of global volatility.
The LEAD Joint Committee will continue to examine the pricing mechanism and consider policy options to ensure that global oil shocks do not translate into disproportionate burdens on consumers.
