Philippine oil stockpiling to hike global prices, Platts exec warns

MANILA, Philippines—A Platts official has urged the Philippine government to drop plans to stockpile fuel products as this will not only create market distortions but also hike global oil prices.

Jorge Montepeque, global director for pricing at Platts, explained that stockpiling would increase the global demand for oil, which would only cause prices to go up. This will adversely affect a country like the Philippines, which imports a huge portion of its fuel requirements, particularly for transport.

“So if you create stockpiles, you will just harm yourself. Furthermore, the oil market now is free, so if there’s a shortage, the price will go up and you just decide whether or not you want to buy. There’s no need for anyone to have a stockpile. You can always buy—it is never a problem to buy,” Montepeque explained.

Montepeque cited the case of countries like Italy, which has been depending on Libyan oil exports. He noted that when Libya stopped exporting due to the conflicts in the Middle East, Italy needed only to look for an alternative source for its oil requirements.

“So you shouldn’t stockpile, it’s not a good idea,” he said in a briefing.

The Philippine government announced in April that it wanted to engage in stockpiling due to fears of supply disruptions that may be caused by the unrest in major oil-producing countries in the Middle East, where the Philippines imports much of its fuel requirements.

Stockpiling was among the options earlier considered by the economic managers to increase the country’s fuel inventory levels, which at one point went down to less than 30 days. Another option considered by the government would be to lend to oil companies which, however, said that they were not willing to take the risk of building up inventories.

PNOC Exploration Corp. (PNOC-EC), the upstream oil and coal exploration arm of state-run Philippine National Oil Co., then put forward a proposal to import fuel since it had the funds and the expertise to do so.

An initial 50 million liters of diesel were supposed to have arrived last May, but this volume was just enough to serve the country’s requirements for one day, and as such, it would be embarrassing to call this importation as “strategic reserve,” Energy Secretary Jose Rene D. Almendras earlier said.

Two weeks after the government’s announcement, the Department of Energy issued a clarification, saying that the diesel importation made by PNOC-EC was merely an “inventory augmentation program.”