This much spike forecast next week if crude price trajectory persists
Pump prices could go up by P10 per liter next week if there is no letup in the increases in world oil prices, which shot up by $10 a barrel on Monday alone to a high of $135, industry insiders said.
Jesus Suntay, Cleanfuel Group of Companies president and CEO, said during a congressional hearing that Dubai crude already rose to $124 a barrel and even traded at a high of $135 per barrel.
Every $10 per barrel increase translates to a P3 to P4 per liter increase in domestic pump prices, Suntay said.
“So, if this goes on next week, pump prices could go up by P10. This is something we have to consider,” Suntay said in a mix of Filipino and English.
At 6 a.m. Tuesday, oil companies raised pump prices by P5.85 per liter of diesel, P4.10 per liter of kerosene and P3.60 per liter of gasoline—already the biggest increase in 10 consecutive weeks of price hikes.
Unioil Petroleum Philippines, however, opted to stagger the increase, implementing an increase of P3.85 per liter for diesel and P2 per liter for gasoline on March 8 and on March 11 by P2 per liter for diesel and P1.60 per liter for gasoline.
As of press time, Unioil is the only company that has announced a staggered increase.
World oil prices traded significantly higher on Monday as Russia continued its onslaught on neighboring Ukraine and as two oil fields in Libya were shut down by an armed group.
At the same hearing, Energy Undersecretary Gerardo Erguiza Jr. called for a higher minimum inventory requirement (MIR) for petroleum products but said there was no supply problem.
“We don’t have a problem with supply. We have more than 40 days in our inventory. The problem is with the price, but we don’t have any problem with the quantity,” Erguiza told lawmakers.
Executive Order No. 134 provides that oil companies and bulk suppliers need to maintain at least 15 days’ worth of petroleum products’ supply, and a minimum stock equivalent to seven days for liquefied petroleum gas (LPG).
Refiners, on the other hand, must secure a minimum inventory of crude oil and refined petroleum products equivalent to 30 days.
“There is a policy to ensure supply. There is an inventory the oil companies have to maintain, and we want to strengthen this through a law. We don’t have a problem with the current inventory, there is no problem in supply,” Erguiza said.
Rino Abad, director of the Oil Industry Management Bureau at the Department of Energy, said the country consumes around 60 million liters per day.
He said if they could set the MIR, they could discuss a 60-day inventory with the oil companies.
At the same time, Erguiza said, the government would put up a strategic reserve.
Meanwhile, the president of the Independent Philippine Petroleum Companies Association, Noel Soriano, said the industry will have to shell out an additional P12.5 billion to finance the cost of capital due to the high oil prices.
This he said was a concern for oil companies, particularly the smaller ones, which might have a problem securing loans. This, in turn, could reduce competition and could open the door to price abuse.
Soriano also said suspending the excise tax on fuel would not bring consumers immediate relief, because the oil companies have already paid the tax on the 40 to 60 days’ worth of fuel inventory, and would sell at a price that includes the tax until they deplete their existing stock.
Speaker Lord Allan Velasco on Monday said the House of Representatives is looking at all possible options to cushion the impacts of rising oil prices on Filipinos, including suspension or reduction of fuel excise taxes.
“We can’t just sit idly by while our kababayan are suffering from the impacts of unabated oil price hikes. We must do something; we must find solutions to this crisis,” Velasco said.
Albay Rep. Joey Sarte Salceda also lobbied for the inclusion of tricycle drivers in the government’s fuel subsidy program, as they are also adversely affected by the continuous oil price hike.
Salceda, chairperson of the House committee on ways and means, said the 2022 General Appropriations Act provides for the inclusion of tricycles in the fuel subsidy program, with a total funding of P2.45 billion.
“Under the law, DOTr (Department of Transportation) is mandated to provide fuel subsidy for tricycles,” Salceda said during a joint committee hearing with the House committees on energy and transportation.
As this developed, the Philippine Independent Power Producers (PIPPA) said the Philippines is experiencing an alarming increase in fuel costs which will be felt by every consumer.
PIPPA said its members are working with the Department of Energy and the Energy Regulatory Commission to ensure that power plants will be available to ensure that the supply is sufficient.
PIPPA called for the removal or adjustment of the Secondary Price Cap (SPC) at the Wholesale Electricity Spot Market (WESM).
“The EPIRA created the WESM as a market that provides proper and accurate price signals, which determine future investments in the power industry. The Secondary Price Cap only distorts the true cost and is not reflective of the real situation of the energy sector,” it said.
As early as 2014, PIPPA has been advocating the removal of the SPC to provide proper price signals for additional investments in the power generation sector.
“More investments will lead to sufficiency of supply and competitive prices,” the group said.
The Energy Regulatory Commission earlier said the imposition of an SPC of P6.245 per kilowatt-hour upon breach of a P9 per kWh rolling average price over a three-day period aims to protect the public and prevent the repetition of excessive and unreasonably high market prices.
Meanwhile, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said he does not see any significant effect of the Russian invasion of Ukraine on the domestic economy and the local currency, saying the country’s external position remains strong despite the uncertainty posed by the current COVID-19 pandemic.
“The BSP is seeing muted impact of the Russia-Ukraine war on the domestic currency. In the peso-dollar exchange rate, the peso continued to trade sideways, with slight depreciation pressure,” Diokno said in a message to reporters on Monday.
“The BSP views such development as a result of the impact of the geopolitical tensions on oil prices, which likewise affected the peso.
But this is in line with the behavior of other currencies in the region which also depreciated against the US dollar,” he said.
Diokno said the Philippines has more than adequate level of foreign exchange reserves to temper any volatility in the exchange rate market and its external sector is supported by structural inflows from overseas Filipino remittances, receipts from business process outsourcing, and foreign direct investments, which have shown resilience even amidst the pandemic.
The peso last Friday lost 24 centavos against the US dollar to close at 51.74 from 51.5 a day ago. It was its weakest level in more than two years or since Oct. 9, 2019 when it closed 51.79.
The latest BSP data showed that the country’s gross international reserves stood at $107.69 billion as of end-January 2022, which represents a more than adequate external liquidity buffer equivalent to 10.2 months’ worth of imports of goods and payments of services and primary income.
It is also about 8.4 times the country’s short-term external debt based on original maturity and 5.7 times based on residual maturity.
Cash remittances from Filipinos overseas in 2021 hit a record $31.418 billion, up 5.1 percent from $29.903 billion a year ago, due to sustained demand for skilled workers abroad as most countries reopen despite the continuing global health crisis.
The 5.1-percent expansion for remittances missed the 6-percent growth target earlier set by the government for last year but it was a significant improvement from the 0.8-percent contraction in 2020 amid the series of lockdowns imposed by countries to prevent the spread of COVID-19.
Meanwhile, net inflows of foreign direct investments in the first 11 months of 2021 reached $9.2 billion, a 52.5 percent growth from the $6.1 billion net inflows in the same period in 2020.
Diokno also said that direct effects of the war through trade and investments are expected to be muted as Russia and Ukraine are not considered as major players in the world economy.
Also on Monday, Senator Risa Hontiveros called for suspending the excise tax on oil products to provide consumers some relief from soaring prices.
Senator Nancy Binay, for her part, urged the DOE to focus on immediately shoring up the country’s thinning power reserves rather than busying itself with other concerns.
She said instead of looking too far ahead, the department should look at the problem that’s staring them in the face.
“What we need is an immediate response and practical solutions to the impending back-to-back power crisis,” she said.
Binay noted the problems hounding the energy sector remain unresolved, and the issue of thin power reserves could threaten the conduct of orderly elections.
The senator also added that the rising costs of fuel brought by the tensions in Europe could also drive up the cost of electricity here.
The Manila Electric Co. has already warned that power rates may climb because of the incessant rise in oil prices.