“Injecting supply in the market doesn’t mean lower oil prices; it doesn’t follow,” lawyer Jose Moises F. Salonga told some 120 participants of a 2-day conference early April on “Doing Business Amidst New Threats.”
Speaking on behalf of Del Callar, Salonga said that the Philippines cannot control oil prices as the Energy Department reported a 0.25-centavo increase in the common prices of gasoline Tuesday.
In its oil monitor report, the Department of Energy revealed that while the price range for diesel, automobile LPG, and 11-kilogram liquefied petroleum gas products remained unchanged since March 29, gasoline products increased from the P52.10-to-P58.12 per liter price range, to P51.85-P57.87 by April 5, 2011.
Government can’t do this by stockpiling or regulating prices, Salonga said adding that doing so would only place the state in a precarious financial position.
“What if government bought US$2 billion worth of oil in March and the prices drop by April?”
Salonga noted that stockpiling is also expensive as it requires P1.8 billion or at least US$30 million, excluding US$600 to US$700 million spending for storage tanks.
Stockpiling, he explained, is the last of an eight-phase DOE plan to ensure oil supply that includes coordination with industry players (phase 1) and international collaboration (phase 7).
As it is, Salonga said, industry players are mandated by law to ensure a 30-day stockpile.
The Ateneo Law School graduate spoke four days after President Benigno C. Aquino III issued Executive Order 32, instituting the public transport assistance program or “Pantawid Pasada.”
The EO issued April 1 was anchored on a view that the socio-political crisis in Middle East and North African countries like Libya, Qatar, Bahrain, and Yemen, “triggered the high fuel prices.”
The EO cited the recommendation of the Inter-Agency Energy Contingency Committee for the Philippine government to “adopt a contingency program to address the adverse effects of the oil price hikes on the prices of fuel, food and other basic commodities, particularly among the vulnerable sectors of the society, such as the public transport sector, the riding public, and the consuming public.”
However, Salonga said the high oil price in the world market is mainly due to speculation “and actually should be going down in view of the adequate oil supply.”
Citing International Energy Agency data, Salonga said that the price of oil, which hovered above US$100 per barrel is estimated to be overpriced by US$20.
“Supply actually exceeds demand and based on our analysis, supply won’t run out in the next five years.”
Still, Salonga said he’s not against stockpiling.
“But let’s call an emergency stockpile as emergency stockpile. I’m more predilected for reducing taxes than the fuel subsidy program.”
[Original story sent to BusinessMirror newspaper on April 5, 2011.]