COULD you build a dike against a tsunami? The question arises because with strong indications the recession in the United States and other parts of the developed world is receding and winter is approaching in these countries, is a tsunami of high oil prices building up to swamp countries like the Philippines?

In any case, some lawmakers want fuel prices to be rolled back. Enraged by the recent fuel-price rises and like King Canute the Great who commanded the waves to go no farther—in vain of course—they want them rolled back and it is the people they are urging to barricade all offices and depots of petroleum companies as a way of enforcing such oil companies action.

Kilusang Bagong Lipunan Rep. Ferdinand Marcos Jr. of Ilocos Norte said these companies—Shell, Petron and Chevron—would be forced to roll back the prices of oil if their operations were paralyzed.

Sen. Francis Escudero, airing concerns over a looming oil-price surge by next year as economies worldwide begin to recover from the recession, called for urgent action by Congress to revise the oil-deregulation law. “The latest round of fuel-price increases reflects developments in the world market that we should prepare for, lest we all fall victim to an oil price tsunami.”

He has reason to be worried. Eric Recto, Petron president, said his company expects a further strengthening in world market prices for crude—which will have an impact on the price of finished products at the MOPS. “If the outlook is bullish—meaning oil prices will further increase—then consumers can expect product prices will increase, too.”

Escudero said that while the country has reduced its dependence on imported oil from 92 percent in 1973 to less than half today, “it is the poor that are hardest hit by any increase in fuel prices.”

“Our country’s poor and dwindling middle class bear the burden most and they constitute a far greater portion of the population. If an oil-price tsunami happens, its effects will be far worse than the devastation wrought by Ondoy and Pepeng,” he said, as he called on his colleagues in the Senate to prioritize proposals to amend or repeal the oil-deregulation law when Congress resumes session next month.

He recalled that just last Monday, at least four oil companies jacked up diesel and gasoline prices by P2 and P1.25, respectively, with oil-company representatives claiming the price hikes were justified by the rise in the price of oil in the international market. It was reported unleaded gasoline rose to $76.24 a barrel from $72.52 while diesel went up to $80.04 from $74.01 from October 5 to 9.

According to energy department officials, Petron and Shell compute their prices based on the price of Dubai crude while Chevron/Caltex and other small players use the MOPS (Mean of Platts Singapore) as their benchmark.

Marcos said that if the Arroyo government could not do anything on the higher prices, the people should use their power to stop the abuses of these oil companies. “If the people would surround the offices of Shell, Chevron and Petron, they will surely give in and they will lower their prices. It is the right of the people to act and protest and one form of protest is to barricade them especially if they are truly taking advantage.”

On Friday, President Arroyo issued Executive Order 839 ordering the oil companies to keep the prices of all petroleum products, temporarily at October 15 levels, until the state of calamity imposed on the entire Luzon is lifted.

The first to obey the order is Unioil Petroleum Philippines Inc., which reverted its fuel prices in Metro Manila and Luzon to its levels on October 15, 2009, effective 10 p.m. of October 25, 2009—diesel by P2 per liter, gasoline by P1.25, and  kerosene by P1.50.

Lakas-Kampi-CMD Rep. Mikey Arroyo of Pampanga, chairman of the House Committee on Energy, promised on Sunday to exercise the oversight functions of his panel to ensure the oil firms abide by the order, otherwise, the House “will be forced to deal with them with the full force of the law.”

Mikey Arroyo said the order was the embodiment of his proposal for a special mechanism for oil-price management during times of calamities, which he first raised during the last Legislative-Executive Development Advisory Council (Ledac) meeting early this month.

“We had worked closely with the DTI [Department of Trade and Industry], DOE [Department of Energy] and the DOJ [Department of Justice] and our collective effort paid off with this EO. I expect the oil companies to abide by the provisions of this EO and maintain their prices at the October 15 level as ordered,” said Arroyo.

As for the proposal to repeal the downstream oil-deregulation law, Arroyo said he believed that the matter is a very ticklish issue that needs to be studied thoroughly. “Do we have to resort to the unpopular OPSF [Oil Price Stabilization Fund] or impose another unpopular tax measure to subsidize oil prices every time there is an increase of price in the world market? This aspect of regulating the oil industry needs a very careful study as we don’t want to burden our people more.”

EO 839 is based on Section 14(e) of Republic Act 8479 or the oil industry deregulation law that states that “in times of national emergency, when the public interest so requires, the DOE may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any person or entity engaged in the industry.”

Fernando Martinez, Eastern Petroleum Corp. chairman and chief executive, said, meanwhile, “It’s impossible for any oil company to bring back prices to what it was last October 15, given the almost P2 per liter additional costs in the Mean of Platts Singapore, which must be reflected this week apart from the additional incurred in the previous weeks.” 

He added that it will be interesting to see how any oil company can sustain that price should they decide to revert, unless world oil prices drop by $12 per barrel this week or they have acquired products acquired at P4 cheaper than the current cost. “We will study our legal options in consultation with the rest of oil industry players.”

The DOE earlier ruled that the latest price increase initiated by the oil companies was fair and reasonable. “The adjustments recently made fairly reflect movements in the international market based on our computation and the data presented by the oil companies,” Energy Secretary Angelo Reyes said in a 4-hour oil- industry stakeholders meeting on Wednesday.

He said the DOE has created a technical working group that will convene and establish some kind of rule of thumb to immediately assess without having to meet if pump prices are reflective of the movements in the international oil market.

Reyes said the rule of thumb will be based on the price of finished products in the Mean of Platts Singapore (MOPS) and the foreign-exchange rate.

Solita Monsod, former socioeconomic-planning secretary and University of the Philippines economics professor, said, “I’m not in favor of controlling prices or setting price ceilings or re-regulating the oil industry, unless the government is willing to shoulder the difference between the pump prices and the cost to bring in petroleum products. Otherwise, controlling prices could just result in supply shortages instead.” (F. Marasigan, B. Fernandez, M. Gonzalez, P. Isla)