The Department of Energy asked Congress on Tuesday to amend the Oil Deregulation Law of 1998 to provide a framework for the government to intervene and address sudden, prolonged oil price spikes.
This developed after the DOE monitored another round of oil price increase of about P1 per liter based on the two-day movement of global oil prices.
DOE has been seeking ways to mitigate the impact of the eight consecutive weeks of oil price hikes to consumers.
“The DOE has also met with the oil industry stakeholders to ensure supply while the problem persists and asked if discounts could be extended to the public, especially to the public transport sector.
Supply was assured and some companies (e.g. Jetti, Seaoil, Shell, Phoenix, Unioil) agreed to extend discounts to the public transport industry on top of existing discounts currently given like vaccination and loyalty incentives,” it said.
DOE said it wants to include the unbundling of the cost of petroleum retail products to determine their true and passed-on costs. In May 2019, Energy Secretary Alfonso Cusi issued a department circular (DC2019-05-0008) requiring the unbundling of oil prices for its data gathering and policy-making function.
However, due to the opposition of the oil industry players, the circular has been subjected to an injunction by the Regional Trial Court despite the DOE’s argument that the ‘unbundling policy’ is not violative of the Oil Deregulation Law.
DOE said it required the unbundling of the cost of retail products to determine their true and passed-on cost.
The DOE maintains that the unbundling of oil prices would result to greater market transparency by establishing the trends in the prices of oil and finished petroleum products.
This, in turn, would help ensure a level playing field within the oil industry, while upholding the best interests of consumers
The agency wrote letter Senate Committee on Energy Chairman Senator Sherwin Gatchalian and Rep. Juan Miguel Arroyo stating that the recent oil price spikes was due to a continuing rise in world market prices resulting from the sudden global increase in demand and an unanticipated lack of supply.
DOE said oil demand is now higher than supply. Demand is estimated at 103.22 million barrels a day as of October 16 versus supply of 100.32 million barrels per day due to the surge of economic activities amid to the containment of COVID-19 as a result of measures adopted and implemented worldwide (i.e. mass vaccination, control of the Delta and other variants, Europe’s “no-lockdown” policy, and China’s economic boost).
“This led to a sudden demand in energy utilization, including the demand on oil products in the transportation sector like gasoline and diesel,” DOE said.
It said demand also went up due to the stocking of petroleum products’ inventories as winter approaches to cover demand from October this year to March of next year, with stocking expected until February.
DOE said the slowed production due to the current global direction of sourcing energy from low-carbon emitting sources also contributed to the tight supply.
“This has limited the optimum level of production, causing the halt and event withdrawal of investments in the development and expansion of the fossil fuel industry,” the agency said.
DOE added that international sanctions to oil-producing countries like Iran and Venezuela that stopped the drilling of oil companies and the buying of oil products from these countries also impacted on demand.
Hurricane Ida a category 4 storm that hit the US gulf coast on August 29 had caused an estimated loss of US crude oil production by as much as 30 million barrels also affected supply.
DOE said that before the pandemic, the latest recorded total worldwide supply is, more or less, 104 barrels a day.
To cope with the supply, the Organization of the Petroleum Exporting Countries committed to increase the production and supply of crude oil by 400,000 barrels/day.
OPEC will meet on November 4 to discuss and reassess the situation.
Domestically, the Philippines utilizes the equivalent of 425,000 barrels per day, which is around 0.4 percent of the world supply.
Meanwhile, Gatchalian welcomed the signing of the LPG Bill by President Rodrigo Duterte.
“We can now boast of a comprehensive and streamlined regulatory framework to govern the liquefied petroleum gas industry in the country to ensure that unsafe cylinders will be immediately taken out of circulation and replaced with new ones to avoid LPG-related explosions and fires,” he said.
Republic Act 11592 vests the DOE with significant enforcement and visitorial rights to ensure that the various Philippine National Standards and codes promulgated for all aspects of the LPG industry are strictly complied with by all LPG stakeholders.
It also lays down in detail the responsibilities of LPG industry participants and retail outlets are specifically enjoined to observe stringent safety protocols.
“We thank the President for signing this much awaited law regulating the LPG Industry, which has been pending for nearly two decades after the bill was first introduced in Congress,” he said.