By Sheldeen Joy Talavera, Reporter
THE PHILIPPINE government plans to acquire at the very least one million barrels of diesel to secure domestic fuel supply as tensions within the Middle East threaten global oil trade and China moves to curb refined fuel exports.
The Department of Energy (DoE) is studying a proposal to direct state-run Philippine National Oil Co. (PNOC) to purchase the diesel for a strategic stockpile that might cover about five days of domestic consumption, Oil Industry Management Bureau Director Rino E. Abad told reporters on Thursday.
The planned purchase is akin to roughly 200,000 barrels a day, or about 33 million liters of diesel consumption each day within the Philippines.
Mr. Abad said the quantity may very well be increased to as much as 3 million barrels, which could be enough to cover as much as 15 days of supply, especially after reports that China is asking refiners to halt latest export contracts for refined fuel.
“That’s a game changer,” he said, noting that about 30% of the Philippines’ diesel imports come from China. “Hopefully, South Korea is not going to follow because about 40% of our imports come from South Korea,” he added in mixed English and Filipino.
China has asked corporations to stop signing latest contracts to export refined fuel and try to cancel shipments already committed, in response to a Reuters report, citing industry sources.
Mr. Abad said PNOC could buy diesel from nearby suppliers akin to South Korea, Japan, Singapore, Malaysia and Indonesia if Chinese shipments are disrupted.
The fuel purchased by PNOC would still be sold to domestic oil corporations to make sure continued supply within the local market, he said.
“At best, PNOC may sell the fuel at cost,” Mr. Abad said. “It is going to simply get better the procurement expenses and distribute the provision to domestic oil corporations.”
Global oil supply chains have come under pressure after the closure of the Strait of Hormuz, a critical chokepoint through which roughly a fifth of the world’s oil and liquefied natural gas shipments pass.
The disruption stems from escalating hostilities involving Iran, the US and Israel.
As a net oil importer, the Philippines is especially vulnerable to fluctuations in global oil supply and costs.
About 98% of the country’s crude oil imports come from the Middle East, in response to DoE data, with the rest obtained from nearby producers akin to Brunei and Malaysia.
Fuel retailers have implemented several rounds of price increases this 12 months as global oil prices climbed.
On Monday, oil corporations raised gasoline prices by P1.90 a liter, diesel by P1.20 and kerosene by P1.50.
The adjustments marked the tenth consecutive weekly increase for diesel and kerosene prices and the eighth straight week for gasoline.
Since January, gasoline prices have increased by P6.70 a liter, diesel by P9.40 a liter and kerosene by P7.70 a liter.
STAGGERED INCREASES
Energy Secretary Sharon S. Garin said some oil firms have agreed to implement potential increases in pump prices on a staggered basis next week to cushion the impact on consumers.
Oil corporations assured the DoE during a gathering on Wednesday that existing fuel inventories remain adequate and that additional shipments previously ordered were on the best way, Ms. Garin told DZMM radio.
“We also talked about staggering the increases and the discounts. They appear amenable,” she said.
Tanya Samillano, president of the Independent Philippine Petroleum Firms Association, said oil corporations briefed the DoE on their plans for price adjustments and inventory levels.
“We discussed how we plan to implement our price adjustments this coming week and updated the department on our inventories,” she said in a Viber message.
Leo P. Bellas, president of Jetti Petroleum, Inc., said many independent fuel retailers had agreed to stagger price increases if global oil costs proceed to climb.
“Just about all nonmajor players agreed to implement the potential increase on a staggered basis,” he told BusinessWorld.
Brigitte Carmel C. Lim, senior vice-president and chief operating officer of Cebu-based Top Line Business Development Corp., said the corporate supports the DoE’s call for measures that might soften the impact of rising oil prices.
“We’ll proceed to observe global price movements and regulatory advisories,” she said in a Viber message.
Ms. Garin said the federal government would determine the dimensions and timing of fuel price adjustments after assessing global market movements over a full five-day trading cycle.
“We’ll determine by the weekend because we want five days of simulation to estimate the rise,” she said.
Economists said even staggered fuel price increases could weigh on household spending.
Foundation for Economic Freedom President Calixto V. Chikiamco said spreading out price increases might reduce the shock to consumers but would still erode purchasing power.
“Staggering the increases is barely higher than a one-time price shock,” he said via Viber. “But the whole increase remains to be large and can cut deeply into disposable income.”
IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa said gradual adjustments might soften the immediate impact but wouldn’t reduce the general burden on households.
“The rise is paced but households will still eventually pay the identical higher prices,” he told BusinessWorld.