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2012 Full report of the Independent Oil Price Review Committee

2012 Full report of the Independent Oil Price Review Committee

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Published by Maui Hermitanio
Full report of the Independent Oil Price Review Committee. Released September 2012
Full report of the Independent Oil Price Review Committee. Released September 2012

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Published by: Maui Hermitanio on Sep 25, 2012
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01/13/2014

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 2012 IOPRC Report 
Page ii
Table of Contents
I. Report of Independent Oil Price Review Committee1. Introduction 12. Policy Questions 23. Findings 23.1. Testing the Relationship Between Local and World Prices 2Graph: Philippine Ratio of Pump Price to Mops, 1994 to 2012 3Graph: Ratio of Unleaded Pump Price to MOPS Mogas, 2004 to 2012 4In Thailand and the PhilippinesGraph: Ratio of Diesel Pump Price to MOPS Diesel, 2004 to 2012 4In Thailand and the Philippines3.2. Gravity Model Explaining Provincial Differences in Prices 5Graph: ROE of Oil Companies and Other Industries 53.3. Assessing the Profitability of the Local Oil Industry 5Graph: ROE of Oil Companies and Other Industries 5Graph: Average ROE, Regulated vs. Deregulated 63.4. Comparing Actual and Predicted Oil Prices using Own Build Up Model 6Graph: Unleaded Gasoline Price Breakdown (1974-2012) in % of Pump Price 7Graph: Diesel Price Breakdown (1974-2012) in % of Pump Price 74. Recommendations and Policy Implications 8Box 1. Findings of Previous Independent Review Committees 10Box 2 Various Oil Industry Regimes Leading to the Oil Deregulation Law 11Box 3 Short History of Oil Tax Regimes 13Figure 1:Historical Taxation on Oil Products (as % of Pump Price) 13Figure 2:Tax Take on Unleaded Gasoline (as % of Pump Price) 14Figure 3:Tax Take on Diesel (as % of Pump Price) 15II. Technical Papers 16A. Testing the Relationship Between Local and World Oil Prices 17A.1. Link Between Domestic Pump Prices and MOPS 17A.2. Comparison with Thailand 23A.3. Symmetry of Response to Changes in MOPS 28Annex A. Detailed Regressionn Results 32B. Regional Variations in Oil Pump Prices 95B.1. Key Questions 95B.2. Regional Price Variations 95B.3. Basic Model and Methodology 100B.4. Analysis of Results 101B.5. Conclusions and Policy Implications 103Annex B.1. Panel Data Model for Unleaded Gasoline 105Annex B.2. Panel Data Model for Diesel 106C. Assessing the Profitability of Oil Industry Players and the Impact of Changesin MOPS and Foreign Exchange on Local Pump Prices 107C.1. Research Question and Significance 107C.2. Methodology and Data Description 107C.3. Results and Findings 108C.3.1. ROE versus Risk Free Investments 108C.3.2. ROE of Oil Industry, Regulated versus Deregulated Period 109C.3.3. ROE of Oil Industry versus ROE of Other Industries 110C.3.4. Computation of Return on Invested Capital 110C.3.5. Internal Rate of Return (IRR) 111C.3.6. IRR on Oil Company Stocks 112C.3.7. Components of Oil Prices 112C.4. Conclusions 114
 
 2012 IOPRC Report 
Page iii
C.5. Recommendations 115D. Oil Pump Price Model and Oil Company Gross Margin 118Summary 118D.1. Introduction 122D.2. Analysis and Conclusions 129D.2.1. Oil Pump Price Calculation Model 129D.2.2. Composition Oil Pump Price 135D.2.3. Oil Pump Price Formula to Predict Oil Price Adjustments 141D.2.4. Retail Market Competition and Actual Oil Pump Price 146D.2.5. Is there Overpricing of Oil Products? 147D.2.6. Is there Excessive Profits resulting in Grossly Unfair Prices? 150Annex D.1. Historical Pump Price, Forex (1973 to 2012) 152Annex D.2. Historical TPLC, Pump Price, Gross Margin Unleaded Gasoline 167Annex D.3. Historical TPLC, Pump Price, Gross Margin Diesel 169Annex D.4. Oil Pump Price Calculator (Excel Model) 171Annex D.5. Unleaded Gasoline Pump Price Breakdown 174Annex D.6. Diesel Pump Price Breakdown 177Annex D.7. Oil Pump Price Calculation Procedure 180IiI. Report on Consultations 1821. Participants in the Consultations 1832. Comments made during Consultations and IOPRC’s Reactions 183Attachment “A” List of Participants in the Consultations 192List of TablesTable A.1. Unleaded Gasoline Pump Price = f(MOPS Mogas 95, taxes, fees) 18Table A.2.
Unleaded Gasoline Pump Price = f(
in MOPS Mogas 95,
in taxes,
in fees) 19Table A.3. Diesel Pump Price = f(MOPS Diesel Price, taxes, fees ) 20Table A.4.
Diesel Gasoline Pump Price = f(
in MOPS Mogas 95,
in taxes,
in fees) 21Table A.5. ECModels:
Pump Price = f(
in MOPS,
in taxes, Pump Price (-1), MOPS (-1) ) 22Table A.6. Ratio of pump price to MOPS for both unleaded gasoline and diesel, 1994 to 2012 23Table A.7. Unleaded Gasoline Pump Price = f(MOPS Mogas 95), different periods 24Table A.8.
Unleaded Gasoline Pump Price = f(
in MOPS Mogas 95), different periods 24Table A.9. Diesel Pump Price = f(MOPS Mogas 95), different periods 25Table A.10.
Diesel Pump Price = f(
in MOPS Mogas 95), different periods 25Table A.11. Ratio of pump price to MOPS for unleaded gasoline, Philippines and Thailand 28Table A.12. Ratio of pump price to MOPS for diesel, Philippines and Thailand 28Table A.13. Unleaded: Asymmetry Between Price Increases and Price Decreases 30Table A.14. Diesel: Asymmetry Between Price Increases and Price Decreases 31Table B.1. Summary Results for Unleaded Gasoline prices 101Table B.2. Summary Results for Diesel prices 103Table C.1. ROE versus Risk Free Investments 109Table C.2. ROE of Oil Companies, Regulated versus Deregulated 109Table C.3. ROE of Oil Companies versus ROE of other Industries 110Table C.4. Return on Invested Capital of Oil Companies 111Table C.5. Internal Rate of Return of Oil Companies 111Table C.6. IRR of Oil Company Stocks 112Table C.7. Components of Oil Prices 112Table D.1. Coverage of Sample Data 123Table D.2. List of Milestone Events Affecting the Taxation of Unleaded Gasoline and Diesel 123Table D.3. Bureau of Customs Brokerage Fees 124Table D.4. Bureau of Customs Import Processing Fees 125Table D.5. Local Value-adding Activities for Unleaded Gasoline and Diesel (2005 to 2012) 126Table D.6. Local Value-adding Activities for Unleaded Gasoline and Diesel (pre-2005) 126Table D.7. TPLC and Pump Price Build-up for 2012 135Table D.8. Unleaded Gasoline Pump Price Breakdown by Regulatory Framework 138Table D.9. Diesel Pump Price Breakdown by Regulatory Framework 139

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