MANILA, PHILIPPINES: Four small oil firms yesterday gave way to a government appeal and agreed to cut their fuel prices by five centavos per liter, after raising them by 35 centavos just two days ago.

The cut was in response to Energy Secretary Vincent S. Perez, Jr.'s call for oil companies to limit price increases, the four members of the Independent Philippine Petroleum Companies Association (IPPCA) said in a statement.

"Mr. Perez made an appeal and we heeded that call. This rollback is also consistent with an agreement between us and the Energy department to implement more frequent but smaller adjustments," IPPCA chairman Fernando L. Martinez said.

But the 50-centavo increase in the price of kerosene stays, he added.

IPPCA members include Eastern Petroleum Corp., Flying V, Seaoil, and Unioil Philippines. Last Monday, they increased their gasoline and diesel prices by 35 centavos per liter, claiming that increases were overdue given world oil prices hitting all-time highs.

Other IPPCA members are Castrol, Filpride Energy Corp., Liquigaz Philippine Corp., Oilink International Corp., 3n2J Shipping and Trading Services Inc., Pryce Gases, PTT Philippines Inc., Rambi Development Corp., and Subic Bay Distribution Inc.

INSIGNIFICANT

IPPCA said oil importers like its members have yet to recover diesel costs and were making only small margins on gasoline.

Also yesterday, an economist said the recent price increase should have little effect on the economy, considering that IPPCA members accounted for only 15% market share.

The effect of their price increases would not even be felt in many areas nationwide, said Dr. Peter Lee U, head of the Industry Group of the School of Economics at the University of Asia and the Pacific.

"I don't think they can have abig effect, unless they have a bigger market share or at least 25%. They have weak presence in the Visayas and Mindanao," he told BusinessWorld.

"They are bigger now than when they started, but I think they'll mostly be price followers other than price leaders," Mr. U said.

But while "unilaterally" having little effect, these increases should not be taken in isolation, he said.

"I would expect that big players would also react and follow. But if they don't, the small ones will probably have to retreat," he added.

For his part, economist Bienvenido Oplas, Jr., of Think Tank, Inc. said the overall effect of price increases was negative, but the economy would learn to adjust eventually.

"Over the long term, people will have to learn to conserve. This might even result in cleaner air in the future, because people will start using less fuel, which is becoming more and more expensive," he said.

Meanwhile, research group Ibon Foundation Inc. proposed ways to halt escalating oil prices.

"Government must now design and at once implement a set of contingency measures to soften the impact of impending drastic increases in oil prices on ordinary consumers as well as the national economy," Ibon said in a statement.

The group urged the government to suspend the implementation of the oil deregulation law; institute a "price control mechanism" on socially sensitive petroleum products like diesel, gasoline, and liquefied petroleum gas; and require oil companies to disclose their inventory, to determine how much oil they have and at what price did they purchase it.

It added the suspension of the oil deregulation law would allow policy makers to rethink the deregulation policy and to look for viable alternatives.

Deregulation, Ibon claimed, allowed huge foreign oil companies and their local subsidiaries such as Petron Corp., Pilipinas Shell Petroleum Corp., and Caltex Philippines, Inc., to monopolize the local oil market and impose unreasonable prices.

For his part, businessman Raul T. Concepcion urged oil refiners not to increase gasoline prices and apply margins against losses in diesel.

IPPCA on Monday scored Mr. Concepcion's allegedly "misleading" statements on overpricing by its members.

Also yesterday, Total Philippines Corp. said its diesel, gasoline and kerosene prices would go up by 30 centavos per liter starting today because of rising world market prices.

Mr. Perez said oil companies must remain sensitive to the impact of high prices on the commuting and motoring public.

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