MANILA, Philippines—Global oil prices are expected to continue its upward trend if only by virtue of the fact that demand continues to grow, global inventories have begun to reach their peaks while supplies worldwide are starting to enter the so-called “depletion mode.”
Energy Secretary Jose Rene D. Almendras said in a briefing Wednesday that this trend has been seen as early as 10 years ago and could not be helped by “pricing safeguards.”
Almendras admitted that since the Philippines has been securing over 70 percent of its transport fuel requirements from abroad, particularly from the Middle East, it would be highly vulnerable to any fluctuations in global oil pricing. Also, since the international oil market is highly deregulated, it is thus difficult to have a regulated local pricing environment unless the government resorts to subsidizing fuel.
This only means that the local pump prices will continue to be at the mercy of any movements in the global market. This is why some local groups have sought government regulation of oil prices to cushion its impact, not only on the transport sector, but also on other industries.
“We just import, that’s why we cannot regulate local market pricing. The only way to regulate is through subsidy like Indonesia which, in 2011, must have spent some $15 billion for oil subsidy. But if we subsidize, where do we get the money? Remember, we have P931 billion in obligations in the energy sector. We cannot move with such a huge debt,” Almendras said.
As such, the best safeguards to put in place, according to Almendras, would be those geared toward developing indigenous resources and transforming fuel requirements into alternatives.
“I wish we started (such initiatives) 10 years ago like all the other countries did. As I said, we’re more vulnerable than most of our neighbors because they started their own initiatives (to develop their own resources) years ago,” he said.
“Putting safeguards on pricing is easy as long as you produce the money. But that is not even sustainable because with continuing price hikes, you just have to dish out more and more every year. The solution is transforming your consumption patterns and your technologies in order to go for alternative and indigenous fuel sources,” he added.
The Department of Energy (DoE) is crafting the “Alternative Fuels Roadmap” that will see existing transport vehicles run on other fuels such as liquefied petroleum gas and natural gas (whether liquefied or compressed), rather than the traditional fossil fuel, diesel.
As for local fuel prices, Almendras admitted that all the DoE could do would be to make sure “that everybody is aware of what is happening as far as pricing is concerned.” The DoE also continues to monitor whether the weekly price adjustments are according to the global price movements.
The DoE, by itself, lacked teeth to sanction any oil company should it be found to be overpricing its fuel products. Almendras said the joint task force of the DoE and the Department of Justice, as prescribed by law, could be the body to declare if a company was profiteering.
However, it was not made clear what actual cases could be filed against them considering the Philippines has a deregulated downstream oil industry.
“That is why there is a need for the anti-trust laws, which in the US, they’re studying now. We don’t have that yet. At least we can let (the oil companies) know that we know (if they are profiteering) and hopefully, they will cooperate. They’ve been very cooperative with pricing. Maybe there’s another way to sanction erring oil companies. There are ways to instill discipline and many mechanisms that can be looked at,” he said, without citing specific details on how the government would sanction erring oil companies.