THE government’s hands are tied to stop local oil subsidiaries from raising oil prices nine consecutive times since September. The Department of Energy (DOE) has no power to regulate oil prices under the Deregulation and Privatization Act of 1998. The agency’s mandate is to privatize energy-related government-owned corporations and to regulate the power and energy industry to reduce oil-fired plants dependency resulting in PNOC-Petron’s privatization. What DOE can only do is monitor and announce oil pricing in the local market.
The country requires 100,000 barrels more of oil to supply the demand of consumers. The government has nowhere gone to get its added oil supply to supplement the present stock it has on hand to at least reduce or stabilize oil prices. Iran and Venezuela could be a source for oil importation but an embargo is imposed on both countries by the US. We are at the mercy of US oil companies.
We consume more or less 425,000 barrels per day (bpd ). This is 0.4 % of the world's supply. However, our suppliers gave us only 300,000 bpd due to low production output by oil-producing countries. The low supply of oil in both local and international markets commands higher prices.
Oil prices spiked worldwide because of the high demand in the market. The demand for oil supply doubled up when countries started to relax lockdowns and restrictions to stop Covid-19 spread globally. Oil-producing countries lowered their oil production because of economic inactivity at the height of the pandemic.
The global market needs 103 million barrels of oil per day as productivity in all countries started to grind. Oil-producing countries could not meet the demand. They supplied the market with 100 million bpd, 3 million short of the demand. This caused oil suppliers to raise oil prices.
The government's response to the oil crisis is to offer “Ayuda” some sort of subsidy to the transport sector to cushion the impact of soaring prices in gasoline. To monitor and keep in check prices of basic and necessary commodities that will be affected by the price increase. All approaches to the oil price hike are palliative and temporary. There is no long-term solution to the recurring problem.
Deregulation and privatization of the oil industry failed to enhance local market competition to keep prices of oil products low. Instead, it helped big local oil subsidiaries like Shell Philippines, Chevron Philippines, and Petron act like cartels uncontrollable by the government.
There are options the government can take. It can negotiate for oil supply by government-to-government negotiations instead of by private oil companies. This is done by other countries. It can also engage in barter trade with oil-producing countries (exchange of country products of equal value) which is done by Turkey and Iran and Russia and Iran. Restore and enhance the Oil Price Stabilization Fund (OPSF). The Government should take back state control of Petron, and the downstream line of the oil industry.
To do all of the above, the government should review and amend the deregulation and privatization law especially provisions that run counter to the interest of the public. Better to repeal the law if does not serve the country’s interest and of the people
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