Pushes review of Oil Deregulation Law
President Rodrigo Duterte approved the recommendations of the Department of Energy (DOE) to implement a P3 billion subsidy program — the P2.5-B Pantawid Pasada, and P500 million fuel discount program for farmers and fishermen — as crude surged past $113 a barrel in the world market on fears of the economic fallout from the Russian invasion of Ukraine.
Duterte also called on Congress to review the Oil Deregulation Law amid the weekly increases in pump prices.
Palace spokesman Karlo Nograles said they particularly wanted Congress to look at provisions that would compel oil companies to unbundle or detail what goes into the price per liter of fuel, set minimum inventory requirements and give the government powers to step in when there is a sharp rise or a prolonged increase in the prices of oil products.
He said the review on the Oil Deregulation Law was among the medium-term measures agreed upon during a special meeting over which President Duterte presided.
Under the law, formally known as the Downstream Industry Deregulation Act, government control was removed to help oil companies become more competitive with their supply and pricing of petroleum products.
Other medium-term energy measures are the building of a strategic petroleum reserve, ensuring minimum inventory requirements and pushing energy conservation and efficiency.
Nograles said Duterte also approved recommendations from the Department of Trade and Industry (DTI) to accelerate renewable energy adoption, support investments in utility-scale battery storage to maximize the use of renewable energy sources, and to support investments in modern storage facilities for oil and grains to increase the holding capacity of the private sector to help in strategic stockpiling.
During the special meeting, Duterte said the government will continue to talk with its existing partners and heighten negotiations with non-traditional partners to address threats to agricultural exports while improving the digital agricultural infrastructure and systems.
Meanwhile, the Palace said the Russian invasion of Ukraine had serious economic, trade, and human resource implications for the country and the people.
Nograles said Duterte offered assurances that mitigating measures and contingency plans will be put in place as part of the government’s pro-active response to Russia’s war in Ukraine.
“The Palace joins the country and the entire world in praying for an early and peaceful resolution to the conflict in Ukraine,” Nograles said.
Nograles reiterated the position of the Philippines, “that war benefits no one, and that it exacts a tragic, bloody toll on the lives of innocent men, women, and children in the areas of conflict.”
Nograles said Duterte met with his Cabinet members on Tuesday night, along with the top officials of the Armed Forces of the Philippines (AFP) and the Philippine National Police (PNP), and other high-ranking officials, to discuss possible scenarios and measures that can be taken if the war continues and escalates.
Duterte approved the recommendation of the country’s economic team to strengthen the domestic economy, stabilize food prices, provide social protection, and explore diplomatic channels to help resolve the conflict.
Nograles said Duterte has also agreed with the recommendations of the Department of Agriculture (DA) to boost local food production to ensure food stability in the Philippines.
The government aims to increase food production through its “Plant, Plant, Plant” Part Two program by increasing the rice buffer stock not less than 30 days; providing financial assistance to rice farmers; addressing price hikes in the cost of fertilizers by providing a fertilizer subsidy; and ensuring market access through bilateral discussions with fertilizer-producing countries.
Nograles said Duterte has also approved the DA’s recommendation to distribute fuel discount vouchers to farmers and fishermen to address rising fuel prices.
He added that the government will also intensify crop production, boost research on reducing feed prices, and provide logistical support to transport food from high-production provinces to cities.
Through the “Kadiwa ni Ani at Kita” program, the government will push the deployment of Kadiwa mobile vans or trucks and subsidies on the transportation cost of basic commodities.
Energy Secretary Alfonso Cusi on Wednesday assured the public that the country had a sufficient supply of oil, but cautioned against the inevitability of domestic price spikes, reflecting high world oil prices.
“We are not lacking in supply given that we source our crude oil requirements primarily from the Middle East, and finished products from Asia-Pacific. However, the impact of the Ukraine crisis on international oil markets does have a direct effect on our prices. This is why we continue to appeal to everyone to observe energy efficiency and conservation measures during this critical period,” Cusi said during the virtual Kapihan sa Manila Bay Forum.
He said the ongoing war in Ukraine underscores the importance of attaining energy security and independence for a country like the Philippines.
“Our country, as an importer of petroleum products, is again at the mercy of global price movements. We must work towards decreasing our dependence on others for our energy needs,” he said.
Cusi said DOE is in constant coordination with oil companies for promotional programs that extend fuel discounts to the public transport sector.
He said the implementation of the Land Transportation Franchising and Regulatory Board of the P2.5 billion “Pantawid Pasada Program” in the 2022 budget will help ease the burden of the transport sector.
The Energy chief said the government is also providing P500 million worth of fuel discounts to farmers and fishermen through the Department of Agriculture.
He said DOE has also proposed amendment of the Oil Deregulation Law to make the pricing of oil products more transparent and to allow the government to intervene during price spikes or prolonged periods of rising prices.
He said DOE can work with the private sector for the strategic reserve.
“We have completed the study and we are coordinating with DOF (Department of Finance) for the funding. We tapped PNOC (Philippine National Oil Co.) to do that project…As of now, we do not have storage facilities that are government-owned, [so]we might have to work with the private sector to make use of their excess storage facilities,” he said.
In response to the request from the Palace, the House committee of ways and means proposed amendments to the Oil Deregulation Law.
Rep. Joey Sarte Salceda, the panel’s chairman, said there were four components to his proposal: 1) creating a strategic petroleum reserve that the government could stock during periods of abnormally low prices; 2) unbundling of the retail prices; 3) requiring all fuel outlets to update any change in retail prices in a central government database for efficient monitoring; and 4) ensuring price transparency so that the consuming public can make informed choices about their purchases.
Crude surged past $113 a barrel Wednesday and equities sank with investors growing increasingly fearful about the Ukraine war’s impact on global energy supplies and the economic recovery.
Russian President Vladimir Putin’s invasion of his neighbor has sent world markets into a spiral over the past week, further fraying nerves on trading floors caused by runaway inflation and tighter central bank monetary policies.
The crisis has seen numerous countries hammer Moscow with a series of wide-ranging sanctions that have isolated Russia and threaten to crash its economy.
The measures have injected a huge amount of uncertainty into markets with supplies of crucial commodities including metals and grains soaring. The price of global staple wheat is sitting at a 14-year high — having risen 30 percent in the past month.
But the main source of unease on trading floors is crude, which has rocketed since Russia began preparing to invade. On Wednesday Brent topped $110 for the first time since 2014 and WTI followed suit hours later to hit a 2013 high.
In afternoon Asian trade, Brent rose as high as $113.02 and WTI peaked at $111.50.
Incoming sanctions have fueled worries that exports will be cut off from Russia, the world’s third-biggest producer of the commodity.
The conflict in eastern Europe comes with prices already elevated owing to tight supplies and a strong recovery in global demand as economies reopen from pandemic-induced lockdowns.
Traders will be keeping a close eye on a meeting of OPEC and other major producers, including Russia, later in the day where they will discuss whether to ramp up output to temper the price rises, which are helping fan inflation.
In his State of the Union address, President Joe Biden said the United States would join a 30-country deal to release 60 million barrels to help temper the surge in prices, though analysts have warned such moves would likely only have a limited impact.
“I can announce the United States has worked with 30 other countries to release 60 million barrels of oil from reserves around the world. America will lead that effort, releasing 30 million barrels of oil,” Biden told members of Congress.
He added that Washington stands “ready to do more, if necessary.”
The decision earlier in the day by 31 member countries of the International Energy Agency’s governing board aims to “send a unified and strong message to global oil markets that there will be no shortfall in supplies” as a result of the Ukraine conflict, it said in a statement.
Ministers “expressed solidarity with the people of Ukraine and their democratically elected government in the face of Russia’s appalling and unprovoked violation of Ukraine’s sovereignty and territorial integrity,” it added.
The invasion came “against a backdrop of already tight global oil markets, heightened price volatility, commercial inventories that are at their lowest level since 2014,” the statement noted.
Producers had a limited ability to provide more supply in the short term, it added.