SHOULD world oil prices continue to soar in the next few weeks, gasoline prices are expected to reach P86.72 per liter and diesel at P81.10 per liter, the Department of Energy (DOE) warned on Monday, as oil firms frowned on an option to stagger this week’s huge oil-price hike to blunt its impact.
Energy officials told senators, meanwhile, of plans to put in place by April an interim strategic petroleum reserves program—focused on diesel—to cushion consumers from the hard impact of the runaway prices, driven further by the Ukraine-Russia conflict.
On Monday, oil firms announced the 11th consecutive week of price increase starting Tuesday morning.
Caltex Philippines and Cleanfuel were the first to announce they will raise diesel prices by P13.15 per liter, gasoline by P7.10 per liter, and kerosene by P10.50 per liter. Other oil firms are expected to follow suit.
The DOE met with oil firms late Monday afternoon. A proposal to stagger this week’s oil-price hike, according to sources, did not sit well with the oil firms.
Based on DOE computation, the year-to-date adjustments stand at a total net increase of P13.25 per liter for gasoline, P17.50 per liter for diesel, and P11.40 per liter for kerosene as of March 8, 2022.
Should Dubai crude price hit $140 per barrel, the DOE said gasoline could hit P86.72 per liter, diesel at P81.10 per liter, kerosene at P80.50 per liter, and liquefied petroleum gas (LPG) at P119.53 per kilogram (kg).
At $120.34 per barrel, domestic pump prices have reached about P72.88 per liter for gasoline, P64.50 per liter for diesel, P66.31 per liter for kerosene, and P96.67 per kg for LPG. These prices are as of March 14.
Any movements in the world oil market affect local pump prices because the Philippines imports more than 90 percent of its fuel requirements. The supply disruptions brought about by the Russia-Ukraine conflict and OPEC’s reduced oil output contributed greatly to the weekly pump price increases.
Strategic reserves
At Monday’s hearing called by the Senate Committee on Energy on the impact of the Russia-Ukraine crisis on Philippine oil supply and prices, the Philippine National Oil Company (PNOC), which is chaired by the Secretary of the Department of Energy (DOE), raised a new proposal to cushion the consumers from incessant rise in oil prices.
The state firm is targeting to put into motion starting April an interim strategic petroleum reserves program—where the government will purchase petroleum products, store this, distribute this to retail outlets, and sell this at a lower rate than prevailing retail prices.
“We intend to lease storage capacities from the oil industry players and to help them carry out the distribution activity to provide discounted fuel to the affected sectors. It’s PNOC that will purchase the fuel that is stored already in existing storage facilities of the oil industry players. We are focusing on diesel. We intend to package it. The proposal would be co-storage and co-distribution with discounted fuel,” said PNOC President and former DOE Undersecretary Jesus Crisinto Posadas, while explaining that the storage aspect of the interim measure will be done via competitive bidding.
On funding, Posadas said, “We are looking at borrowing from DBP or LandBank, and we are also asking DOF for some tax relief so that the discounted fuel can be given to the targeted beneficiaries. In order words, the P6,500 subsidy we intend to use that in terms of discounted fuel.”
The proposed interim plan was already discussed with the oil firms, said Posadas, while adding that PNOC’s first purchase is targeted “within April because our term will be ending in June or until our replacement is properly seated.”
Different from PSRP
THE interim measure is different from the Philippine Strategic Petroleum Reserve Program (PSRP) of the DOE and PNOC. The PSRP consists of large stockpiles of crude oil as well as petroleum products, stored in facilities located around the country—and possibly overseas—that are released during periods of local or international oil supply disruptions.
There is already a DOE circular on this, but the feasibility study (FS) has yet to take off because, Posadas said, “the process of engaging the consultant is still in process.”
Under the circular, the PNOC is tasked to acquire the necessary storage and blending capacity by construction, lease, or other acquisition options based on the agreed minimum and maximum volume level determined by the feasibility study.
DOE officials continue to push for the amendment of the Oil Deregulation Act and the TRAIN law to help cushion high oil prices. In particular, it is pushing to unbundle fuel prices and include Minimum Inventory Requirements in the law.
The DOE again asked the public to practice efficient use and conservation of fuel. It added that it is oil firms’ decision on whether or not to implement a staggered price increase. As of press time, there was no announcement to stagger the pass-on of increases.
Image credits: Nonie Reyes