And government's ability to shield consumers from the imminent increase will be eroded by its obligations to repay retailers an estimated P200 million for cumulative subsidy costs incurred as far back as last June.This week, BusinessWeek learnt that the fuel retail sector has generally been in a position of "over-recovery" since April, meaning retailers have been generating profits above their government prescribed target due to steady crude oil prices.Various executives within the sector said government had been using these over-recoveries as a repayment of the subsidy costs it owed to retailers for several lean months stretching from June last year into 2013. During these months, the local retail sector experienced widening under-recoveries, which left government owing up to P200 million in subsidy payments.
"Government specifies the profit oil companies should make and since about April, the over-recovery has meant they were making more profits than stipulated," explained one director."All things being equal, government should actually have announced a reduction in pump prices, but the over-recovery came after a long spell of under-recoveries going back to last year. If the over-recovery continues for another four to five months, we would be square."The director explained that theoretically, the National Petroleum Fund was supposed to have catered for the long-spell of under-recoveries."Last April was the last time the Energy Affairs Department paid oil companies a little and it was not enough," he said."The fund does not have any money because of the effect of cumulative under-recovery. The department has also been trying to build the fund back up during the over-recovery, but any changes will wipe away the funds."
