MANILA - Philippine oil companies announced another round of price rollback effective Tuesday, February 16, 2016.

But how are pump prices computed?

Philippine retail prices are based on the average prices based on the Mean of Platts Singapore (MOPS). This refers to the prices of finished product, not crude. Finished products are the gasoline and diesel sold in pumping stations in the Philippines.

In our case, oil firms are required by law to blend 10 percent ethanol for gasoline and 2 percent coco methyl esther (CME) to create biodiesel.

The biofuels component are priced differently and separately from the fuel products. When asked why the latest announced reduction seems to be lower than the projected, the Department of Energy (DOE) said if only based on MOPS or finished products, the reduction should have been P1.60/liter but the P0.20 slash on the rollback is attributable to ethanol prices, which the DOE said is still going up.

Ethanol in the Philippines comes from sugar, and sugar prices have been on the high side since a few years back.

NOT DUBAI, BRENT AND WTI

The DOE explained that Dubai crude is used as basis for crude from the Middle East which the Philippines used as basis years before. WTI or West Texas Intermediate refers to crude prices in the US while Brent crude is used in Europe.

While the Philippines still has two refineries (Petron and Shell), the basis of their pricing is still MOPS.

WEEKLY PRICE ADJUSTMENTS

Why weekly? The DOE said this system was adopted during the term of former Energy Secretary Angelo Reyes.

The formula is simple: the MOPS average prices this week versus the MOPS average prices last week will be reflected next week.

The DOE said this system makes sense versus a daily reflection since actual oil products do not actually arrive daily but sometimes weekly or every two weeks.

When asked if local oil companies reflect the correct prices, the DOE said, yes--not to the exact centavo but nearly accurate.

EXPOSE FORMULA/MOPS PRICING

In the spirit of transparency, why won't the DOE publish or include in its website the MOPS pricing since the government subscribes to it anyway to the tune of more than a million pesos every month?

The DOE said the MOPS contract prohibits the sharing of data to the public. All they can do is to post retail prices and analysis on the direction of fuel prices but only after the oil companies have announced the price adjustments.

CARTEL?

Another question that boggles the minds of consumers is why do all oil companies announce similar price adjustments? The DOE explained that while oil firms announce similar price cuts or increases, actual prices in the field differ.

The DOE said adjustments are the same due to competition, similar to a sari-sari store or market stalls. If an adjacent store increases by P0.10/liter for example, the DOE said, why would its competitor hike the price of the same product by P0.15/liter?

But even assuming the prices of an adjacent gas station is higher than the other one, the DOE said that station will just be asked to explain and if the cost of operation and cost of fuel plus profit can be justified, the government cannot do anything about it as the industry is deregulated.