An Open Reply to COPW regarding inaccurate statements

We regret that COPW’s statements, which have incomplete, inaccurate and baseless information, are misleading the public and have maligned the reputation of our company.

We therefore wish to clarify on these claims, to promote transparent and factual dialogue with the general public on these important issues:

1. On COPW’s plea requiring oil companies to submit information on inventories and costs:

The oil companies submit these and other information regularly to the DOE, in compliance with Sec. 12 of the Republic Act No. 8479, An Act Deregulating the Downstream Oil Industry and for Other Purposes. To advise us to do so would then be misplaced and irrelevant, as this has been an ongoing practice by Pilipinas Shell Petroleum Corporation (“Shell”) even prior to the deregulation of the oil industry in 1998. Thus, COPW’s insistence that we submit this information demonstrates their failure to understand the Deregulation Law and its nuances.

2. On COPW’s statement that Shell and Petron refineries were closed in December 2008, January 2009 and up to mid February 2009. 

As earlier advised to the DOE, the Shell refinery is currently on regular annual maintenance shutdown, but NOT during the periods December 2008-January 2009, as stated in COPW’s ad.

3. On COPW’s statement that the basis for oil pricing should be Dubai and New York Mercantile Exchange Index (NYMEX) during the periods when refineries are in operation:

Firstly, the reference price marker in Asia as globally known is not NYMEX, but the Mean of Platts Singapore (MOPS).

Secondly, and more importantly, COPW’s pricing method is inaccurate, as it is based on crude cost, which was only appropriate during the regulated period when the players were all refiners. Most of the petroleum products sold then came from locally refined crude. Since deregulation, the local oil industry landscape has dramatically changed.

The proportion of imported finished products has increased significantly. These are valued based on MOPS (Mean of Platts Singapore) and not based on crude costs. MOPS based pricing ensures that local refineries remain competitive; such that the pricing of locally produced products are at par with imported finished products.  This also ensures that at times when refinery production costs are higher, these are not unnecessarily passed on to the local consumer. 

4. On COPW’s statement that we should have bought crude in advance for March and April 2009 to take advantage of the low prices in February 2009.  He stated NYMEX costs of $ 33.98 per barrel and $ 37.51 per barrel for March and April deliveries, respectively: 

Firstly, if we bought crude in advance during this period, the prices would have been much higher than the prices quoted by COPW because the expectation during that time (and even up to now) was for crude prices to increase, due to OPEC reductions and the stimulus plans in various countries. 

Secondly, buying crude in advance at fixed prices is a practice that is discouraged within Shell, as this would be tantamount to speculation and would therefore be subject to substantial financial risks. No one really knows how crude prices will behave, these can go higher or lower, and since Shell buys a substantial volume per month, a slight difference in actual price could therefore result in huge gains or losses.  Shell, therefore, takes a prudent approach in order to avoid taking unnecessary risks.

Pilipinas Shell is appealing to COPW to ensure accuracy of its data and claims to avoid misleading the public. Their unfair and unfounded charges send a wrong signal to both the local and international business community, which values consumer advocacy based on correct, well-studied and thoroughly evaluated data sources.

Any party or individual can claim to have the noble duty of ‘protecting public interest’ and promoting ‘common good’ – but we believe it should not be accomplished based on unsubstantiated claims, particularly when the party has not taken any direct stakes in the industry by which the claims were being made.

The challenge is taking accountability and utmost responsibility, particularly in conveying information – primarily for those affecting people’s daily lives. To mislead the Filipino public is contrary to COPW’s professed intentions of serving and protecting consumers. Public responsibility demands that COPW admits its factual mistakes, correct its wrong data and conclusions so that the public may know the truth about the issues.