LOCAL oil companies would have no other option except to revert to their October 15 price levels, as mandated in Executive Order (EO) 839 issued by President Arroyo last weekend.

Energy Secretary Angelo Reyes stressed this to oil companies at a stakeholders’ meeting on Monday between the Department of Energy (DOE), the Department of Justice (DOJ) and the oil-company executives.

The oil companies, however, signaled other options—taking the matter to court, or rationing or not selling—as they raised fears they will be trapped between the regulator-set prices in the country, while coping with the vagaries of the global oil market.

Relatedly, Palace officials indicated the Executive would not hesitate to enforce the new EO, which imposes sanctions on oil companies that refuse to comply. The Palace had anchored the order, which came on the heels of a series of price hikes, on statutes giving the state certain emergency powers in a calamity. The recent back-to-back storms have financially devastated many households and businesses, officials said.

Reyes added that there should not be a situation where an issuance has been made and compliance is optional. “Compliance with any law or any presidential issuance is mandatory. So we will implement this law,” he stressed.

Still, the oil companies may look at exercising legal remedies—which the government may look into and address, he added.

Ernst Wanten, president and managing director of Total (Philippines) Corp., warned that rolling back prices just to comply with EO 839 will have implications on future investments.

“And we have questions about the next supply shipments; we have to buy because at this time it’s a straight loss. And we’re going to a situation where it’s better not to sell,” Wanten added.

Malacañang said on Tuesday it will firmly implement EO 839, and warned oil firms of legal action if they fail to temporarily freeze pump prices to October 15 levels in Luzon, hit hard by storms Ondoy and Pepeng.

In a radio interview, Executive Secretary Eduardo said, “We have given that directive [EO 839] to the DOE and the DOJ so that oil companies would know that the government is not without power to be able to regulate when the interest of the greater majority is at stake.”

President Arroyo had said EO 839 is pursuant to Section 14(e) of Republic Act 8479 or the Downstream Oil Industry Deregulation Act of 1998, which gives the DOE the authority to temporarily take over or direct the operations of any person or entity in the industry in times of national emergency, when required by public interest and under “reasonable” terms and conditions.

Ermita said Justice Secretary Agnes Devanadera has assured him that she “would not hesitate to gather evidence and file charges” against defiant oil firms.

“We hope it would not reach a point of having to open the books of oil companies to check if they are following EO 839 in terms of benchmark price,” he said.

Ermita noted that Unioil immediately complied with EO 839 and reduced its pump prices by P2 per liter since it knew that “they have to cooperate not so much for their own good but for the good of many.”

Shell: Billions in losses

Edgar Chua, country chairman of the Shell Group of Companies in the Philippines, said reverting to October 15 price levels spells billions of losses for oil companies.

He asked the DOJ if the government would take it against any oil company that would opt not to sell petroleum products. “By selling at the price of October 15, a company will incur losses,” he added.

Lawyer Ruben Fondevilla, DOJ assistant chief state counsel, said whether the government would take it against any oil company that opts not to sell will depend on the circumstances.

If an oil company decides not to sell amid supply availability—then that could be a different circumstance. “What I’m saying is that they might be or they might not be taken into court, so it would depend on the circumstances,” Fondevilla added.

An oil executive, who requested anonymity, told the BusinessMirror that rationing oil supply could be an option some of them would take in view of the order.

Mark Quebral, Chevron Philippines Inc. manager for policy, government and public affairs, said the issuance of EO 839 will set a precedent which might not send a good signal to parent companies of multinational oil firms doing business in the Philippines. “We are looking at our remedies, legal or otherwise,” he added.

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 reregulating 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.”

In a separate statement, the Bagong Alyansang Makabayan (Bayan) said it is still not clear if the biggest oil firms who control the vast majority of the oil industry, from refining to gas stations, will even comply with this order.

“Those who complied comprise only a tiny fraction of the entire oil industry. If the EO is not strictly enforced, then it is a toothless tiger,” Renato Reyes Jr., Bayan secretary-general, said.

He added that the people demand immediate relief from high oil prices as well as long-term protection from “overpricing by the oil cartel.” He insisted the government must be open to the repeal of the deregulation law.

He found the implementation “strange and appeared to have no guidelines.”

“Malacañang is leaving it to Secretary Angelo Reyes. However, Secretary Reyes is himself opposed to the idea of having a price ceiling for oil products. How then can he diligently implement the measure?” Bayan’s Reyes asked.

Even with the recent consensus among oil firms to heed the directive of President Arroyo to restore their pump prices to the October 15 level of oil prices, Speaker Prospero Nograles said the rollback should take place immediately. He noted that the so-called Big 3—Shell, Caltex and Petron—might try to use dilatory tactics to comply with the President’s order.

“It should just be a phone call away and the rollback can take effect immediately. However, the representatives of the so-called Big 3 are raising some concerns before their compliance to the President’s directive. This, to me, is just a dilatory tactic,” Nograles said as he lauded President Arroyo for her swift action to stop the oil firms from further punishing the millions of Filipinos who were devastated by typhoons Ondoy and Pepeng and Ramil.