CRITICAL REPORT: Asymmetric Pricing and Profiteering in the Philippine Oil Market
Analysis Period: October 2025 – March 2026
Source Material: 18 Weekly DOE Oil Monitor Reports
1. Executive Summary
This report presents a critical analysis of weekly domestic oil price adjustments compared to global benchmarks. Our findings indicate a systematic “Upward Bias” in pricing. In every week of the analysis, oil companies implemented domestic price changes that exceeded what was necessitated by world market costs and currency fluctuations.
Key Stat: Across the 18-week period, consumers were overcharged by an average of P1.34/liter for gasoline, P1.90/liter for diesel, and P1.79/liter for kerosene beyond fair replacement costs.
2. Methodology: The Fair Pass-Through Model
To determine “overpricing,” we used a conversion model that translates international benchmark movements into local consumer impact:
$$Expected Change = \frac{\Delta World Price (USD/bbl) \times Exchange Rate (PHP/USD)}{158.987 (Liters/bbl)}$$
The Pricing Gap is the difference between the Actual Domestic Adjustment and this Expected Change. A positive gap indicates the consumer is paying more than the increase in the oil companies’ global procurement costs.
3. Geopolitical Context: The March 2026 Price Shock
The most severe pricing anomalies occurred during the US-Israel-Iran military conflict, which began on February 28, 2026.
The “DOE Data Blackout”
Critically, the Department of Energy (DOE) failed to release its weekly Oil Monitor reports for the two weeks (Feb 24 and Mar 3) immediately following the outbreak of the war. During this period of silence, world prices spiked by nearly $45/barrel. By the time the DOE resumed reporting on March 10, the domestic price hike was implemented at its peak, with zero public data to verify the fairness of the adjustment during the blackout.
4. Major Findings & Discrepancies
A. Failure to Pass on Savings (Oct - Dec 2025)
When world prices dropped, domestic prices remained “sticky.”
- Dec 16, 2025: World diesel fell by $2.40/bbl (justifying a -P0.89/L drop). Domestic prices fell by only -P0.20/L, allowing companies to pocket P0.69 per liter in unearned margin.
B. The Kerosene Shock (Nov 25, 2025)
Following a two-week “freeze” during a National State of Calamity, kerosene was hiked by +P9.95/liter. Our model shows that even accounting for the rise in world prices and the previous frozen weeks, the hike was P8.00/liter higher than justified by global benchmarks.
C. Exploiting War Volatility (March 2026)
As the Strait of Hormuz closed in March 2026, volatility was used as a cover for massive margin expansion.
- March 31, 2026: World gasoline fell by -$7.00/bbl (justifying a -P2.65/L drop). Instead, domestic prices were hiked by +P2.90/L. This represents a total discrepancy of P5.55/liter in a single week.
5. Statistical Summary of Overpricing (P/Liter)
| Product | Avg Overcharge | Max Weekly Gap | Weeks Overcharged |
|---|---|---|---|
| Gasoline | P 1.34 | P 5.55 | 18 / 18 |
| Diesel | P 1.90 | P 7.57 | 18 / 18 |
| Kerosene | P 1.79 | P 9.17 | 16 / 18 |
6. Rebuttal: The “Replacement Cost” Fallacy
The industry and the DOE frequently justify immediate price hikes by citing “Replacement Cost Accounting”—the claim that companies must raise prices instantly to ensure they have enough capital to purchase the next, more expensive shipment of oil. This analysis rejects that logic on several grounds:
- The Asymmetry of Accounting: Companies are quick to use replacement cost logic when world prices rise (hiking prices immediately), but they pivot to “Actual Cost” logic when world prices fall (claiming they must first sell off expensive “old stock”). This selective application of accounting principles ensures that the consumer never benefits from a downward market shift with the same speed they are penalized by an upward one.
- Consumers as a “Liquidity Bailout”: Using immediate hikes to fund future purchases effectively treats the Filipino consumer as an interest-free credit line for multi-billion dollar corporations. Capital-rich oil firms should bear the short-term liquidity risk of procurement rather than passing 100% of the volatility to the pump instantly.
- Inventory Windfalls: When prices are hiked on existing stock that was purchased weeks prior at a lower rate, it generates a “windfall profit” for the company. Without public disclosure of actual inventory levels at local depots, the “replacement cost” argument remains a theoretical shield for price gouging.
7. Conclusion and Recommendations
The evidence suggests that the “deregulated” oil market in the Philippines operates with a significant pro-industry bias. Price hikes are implemented aggressively and in excess of global costs, while price drops are withheld from the consumer.
Recommendations:
- Mandatory Reporting: Penalties for the DOE failing to release weekly reports during geopolitical crises.
- Margin Transparency: Requiring oil companies to justify domestic price hikes that exceed 120% of the world-implied fair change.
- Automatic Price Triggers: Establishing a mechanism that forces immediate domestic price drops when global benchmarks fall by more than $5/bbl in a single week.