Saturday, April 6, 2013

Real Reason why Big Oil Companies are crying foul over alleged oil smuggling

Customs chief Ruffy Biazon should not resign his post. First, it is not his fault. Second, the system is defective and calls for an overhaul, which, will take time, and third, replacing him with another one at this crucial time is definitely not logical.

The problem really is patronage politics. Most of our politicians are themselves businessmen. Or, if they are not businessmen, they have numerous debts with businessmen. What happens to the Bureau of Customs is symptomatic of what is happening in the entire system.

Really, oil smuggling is the "highlight" at the Bureau of Customs. Meaning, this is the source of funds of many interests. Smuggling not just on gasoline but of other materials, particularly construction materials exist. Steel products for example are being smuggled wholesale. Yet, the authorities allow this because of market demands.

Why are big oil companies now suddenly out in the open? Because they are being killed by small and medium sized oil retailers in the provinces. These Big Oil Companies are losing market share. Due to the oil deregulation law, many individuals have entered into the oil business. Many new brands have sprouted in the market. Just drive up to the North or South of Metro Manila or even just go to the outlying provinces and you'll notice that there is a proliferation of small and medium-sized gasoline stations. These BIg 3 are losing the franchise game, since why pay for royalties when you can establish your own brand anyway?

Profits are not what it was several years ago when the market is still underdeveloped. Now that individuals have entered into the oil business, dominance and profits will surely diminish.

It will not be long before the Big 3 or 4 realize that their brands are being summarily executed in the rural areas. Now, motorists do not discriminate, whether they are gassing up in a Petron or Caltex or Shell station. And since motorists are now becoming wise with their gas purchases, branded gasoline is under threat.

Analysts have since predicted this to happen several years back. This is the scenario which the oil deregulation law tries to establish---a freely deregulated market. Now, when the market has now been deregulated, expect those who dominated the market or cartelized the market to balk and ask for government intervention.

Government should be wise not to intervene in this issue since this is not exactly a smuggling issue but a market competition issue. Cartelization is becoming a thing of the past. Now that things are improving in the oil retail sector, here comes the Big 3 and accusing government, particularly the Bureau of Customs of allowing massive smuggling of oil. Smuggling as I said, is happening since the beginning of time, and crying wolf right now is simply an expression of fear.

What would stall the expected death of branded gasoline? Improve their products. Filipino motorists are sometimes lured by sophisticated products.