An analysis of automatic price adjustment in a fully deregulated oil market: the Philippine case
Date
1995-10
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Abstract
The paper is a counter-factual argument for the abolition of the OPSF and spouses the deregulation of the domestic oil market. To illustrate and explain the argument, domestic prices of the different petroleum products are recomputed using the weekly Singapore posted and spot prices as the wholesale posted price (WPP) plus the added distortion of the Philippine foreign exchange rate vis-a-vis the U.S. Dollar, to come up with an adjusted WPP to explain why, despite the erratic and uncertain nature of a market driven, weekly adjusted domestic petroleum prices, deregulated domestic petroleum product prices is more efficient than the present OPSF based pricing mechanism. Domestic petroleum prices, under the deregulated environment are principally influenced by the world price of the product, the foreign exchange rate of the country, and the level of domestic competition.
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Keywords
Automatic price adjustment, oil market