Oil-price freeze in Vis-Min urged

EVEN as top oil refiner Petron Corp. issued estimates of a P1.5-billion quarterly loss for complying with Executive Order (EO) 839, which freeze oil prices in Luzon to give the public relief from recent calamities, the clamor to extend the EO’s effects to Visayas and Mindanao mounted on Wednesday.

The separate but similar calls came from Party-list Rep. Satur Ocampo of Bayan Muna and former socioeconomic-planning secretary Ralph Recto, who decried the injustice to residents of Visayas and Mindanao. These people are nonetheless impacted by high fuel prices even though they were spared by recent typhoons Ondoy and Pepeng, the two men said.

In fact, noted Recto—entangled in recent weeks in a word war over oil prices with energy chief Angelo Reyes—the people from Visayas and Mindanao were reeling from disproportionately higher prices even before calamities visited Luzon.

Meanwhile, Petron Corp., one of the country’s refiners, estimates a net loss of as much as P1.5 billion in the fourth quarter of the year, mainly because it has to comply with the EO. Petron said in a disclosure to the Philippine Stock Exchange that it complied with the Palace mandate asking oil firms to roll back prices by P1.25/liter for its premium gasoline, P0.85/liter for regular gasoline, P2/liter on diesel and P1.50/liter for kerosene on Tuesday morning, to reflect fuel prices prevailing on October 15.

Petron noted the price cuts were done despite the rising costs of crude oil and finished petroleum products in the world market.

“With this price control, we estimate to incur a net loss of P1.5 billion in the fourth quarter of 2009 alone, as it begins to digest higher-priced crude-oil inventory in November and December,” Petron said.

Petron recalled having suffered a loss of P3.9 billion in 2008, and said it is only beginning to recover from this record loss.

Petron said it has also made substantial investments (over $400 million) in the past five years alone at its Bataan refinery to ensure the local production of fuels that are Clean Air Act-compliant, and boost the country’s economy through the domestic manufacture of petrochemical feedstocks.

Shortage risk reiterated

Petron reiterated the oil players’ warnings of a possible supply shortage as some companies may opt to stop selling fuel products altogether instead of selling at a loss.

Petron said it would be impossible for them to supply the shortfall if this happens.

Petron added that EO 839 also does not state any duration for the price freeze, specific areas affected (for instance, Palawan is considered to be in Luzon) or list of fuel products covered.

“We seek a clarificatory supplement to EO 839,” said Petron, adding that this would have a negative effect on future investments in the capital-intensive oil industry.

Meanwhile, almost the whole of Luzon island is already under a “price war,” which means that actual pump prices of fuel products are well below suggested retail prices (SRP), Petron noted.

In Metro Manila, for instance, diesel prices are P5 liter lower than the SRP, according to Petron.

 It underscored the need for the government to share the burden by lowering the tariffs to mitigate losses that will be incurred.

“Amid the difficulties that may arise from our compliance with this EO, still the company will do its best to ensure a reliable and consistent supply of fuel products,” Petron said.

Pilipinas Shell Petroleum Corp. vice president for external affairs Roberto Kanapi earlier said that Shell has also engaged the Department of Energy (DOE) to seek clarification on some unclear points of the order, particularly the products affected, the period of effectivity, the definition of pricing levels, i.e. suggested retail price versus actual retail price and the geographical coverage of the executive order since not all areas in Luzon were affected by typhoons Ondoy and Pepeng.

In view of the resulting lower and fixed prices at the retail stations compared with the wholesale prices for commercial and retail accounts, Kanapi said Shell expects a potentially significant shift of purchases by commercial and industrial accounts— from being directly supplied by the oil companies to buying from retail sites.

To manage this potential volume shift, which cannot be served by its retail sites, Kanapi said Shell will allocate fuel supplies to its retail stations in Luzon based on their average sales in recent months effective immediately.

Why Luzon only?

Deputy Minority Leader Rep. Satur Ocampo said EO 389 should be expanded to Visayas and Mindanao.

“If the reason for the EO is to protect consumers, why not expand its scope of coverage to include the rest of the country? After all, no one is exempted from the impact of oil-price hikes,” said Ocampo in a statement.

Former Neda chief Recto said the government should not “penalize” Visayas and Mindanao with skyrocketing oil prices which the Palace ordered frozen in calamity areas in Luzon.

“Visayas and Mindanao should not bear the brunt of the temporary freeze in oil prices in calamity areas,” Recto said. “This variation of a cross-subsidy is unfair to areas which are economically less prosperous than Metro Manila. A Cebuano fisherman has the right to complain if the gas for his banca is more expensive than the gas a Makati resident loads in his SUV.”

Recto recalled that even before killer typhoons Ondoy and Pepeng struck, fuel prices were already higher in Bacolod, Cebu, Tacloban and Cagayan de Oro, among others.

“So the price freeze in the damaged North can’t be used as a scapegoat to raise the prices in the destitute South. Visayas and Mindanao are not cost-recovery markets,” Recto added.

Ocampo said Shell, Caltex and Petron will predictably try to get around the executive order by increasing oil prices outside Luzon.

“Already, Shell has released statements paving the way for this move by saying there’s a shift in commercial and industrial customers’ purchases to retail outlets. We expect Petron and Caltex to follow suit with their own excuses justifying regulated allocations supposedly based on average sales, then eventually, the declaration of a shortage. In the meantime, as the public is focused on developments in Luzon, the cartel will continue to jack up prices in Mindanao and Visayas,” Ocampo explained.

Relatedly, Ocampo castigated the DOE and the Department of Justice Task Force for its alleged failure to monitor the value and volume of import shipments of the oil companies together with duties and taxes paid.

He said “the DOE and other government agencies tasked to do the monitoring have been less than strict to the point of looking the other way when it came to the predatory business activities of the oil firms.”

Shortage ‘artificial’

Party-list Rep. Liza Maza of Gabriela said on Wednesday the warning by oil companies of a possible shortage is artificial and described it as an economic sabotage.

“EO 839 will never be enough to bring down the price of oil. Once the state of calamity is lifted, what will keep these oil companies from imposing skyrocketing increases? Giant oil firms will again flood us with triple increases week after week,” Maza said.

Citing reports, Maza said that since President Arroyo came into power, the price of premium gasoline has increased by 147 percent, while that of unleaded gasoline has jumped by 151 percent. Regular gasoline has increased its price by 150 percent.

“As long the Arroyo administration pays no heed to the call to scrap the oil-deregulation law and the 12-percent [expanded] value-added tax [E-VAT] on petroleum products, we will always be at the mercy of the oil companies,” Maza said.

Maza has coauthored House Bill (HB) 1724, or the “Act Repealing the Republic Act 8479, known as the downstream oil deregulation act of 1998”. She has also filed HB 34858 removing the 12-percent VAT on oil products and HB 3433 to repeal the E-VAT.

Temporary relief only

Even as oil companies signified willingness to comply with EO 839, Sen. Edgardo Angara cautioned that the lower prices are “at best temporary.”

Angara advised consumers to remain alert against excessive oil dependency, warning that “we still face the threat of a possible shortage, leading to another series of oil-price spikes in the near future.”

Earlier, former socioeconomic-planning chief Recto challenged the oil companies to follow independent Unioil’s move to voluntarily slash pump prices by P2 per liter.

“If Unioil can do it, why can’t others do the same? After all, they operate under the same market conditions and business environment,” Recto said. “And Unioil is doing it not out of patriotism because as a company organized to make profit, it cannot sell its inventory at a loss.”

According to Recto, Unioil was able to cut prices because it believes, after running some numbers, that profit can still be had even at reduced prices.

In a separate statement, Angara proposed that the government seriously explore renewable-energy sources as the Philippines is one of the most oil-dependent countries in Asia.

“This puts us in a vulnerable position as the country’s demand for energy can only be expected to grow as households, transport and factories multiply,” Angara pointed out. “In 2008, we saw the year of skyrocketing cost of fossil fuels with oil reaching record prices, although prices tempered at the end of the year.”

Asserting that “we cannot be complacent about our oil use,” Angara enumerated solar, geothermal, hydro and wind energy as proven power technologies, for which the Philippines has great and untapped potential.

“The future is in clean, renewable energy, which is predicted to be one of the biggest industries by 2014.”

He said the Renewable Energy Act of 2008 encourages local entrepreneurs to go into the development of the country’s vast renewable-energy resources and decrease our dependence on imported fossil fuel.