Concepcion group bucks oil exchange

A consumer group said yesterday that the proposed National Oil Exchange Corp. (NOEC) "is laudable but not feasible" and will only create a monopoly for the government.

Instead, the Consumer and Oil Price Watch (COPW) is proposing the formation of an independent oversight committee (IOC) "to ensure stable oil prices in the light of deregulation."

The NOEC is embodied in House Bill (HB) 8710 authored by Rep. Enrique Garcia, a known staunch critic of the major oil companies in the Philippines.

COPW chairman Raul T. Concepcion said that the bill would create "a government oil monopoly in the distribution, hauling, trucking, a nd storage of finished petroleum products."

According to Concepcion, the country's requirement is too insignificant to influence the market. "Worldwide bidding takes place daily involving tremendous volumes where we do not count at all," he said.

Concepcion also pointed out that under Garcia's proposal, "the state will carry the inventory cost of petroleum products brought by the NOEC. The government's track record in running businesses leaves much to be desired, not to mention inevitable inefficiency and corruption."

Instead, the COPW head is suggesting that government form the IOC, which will have strong powers in monitoring the prices of imported crude oil and refined products.

"The IOC will have the power to demand from oil companies to submit their records of their purchases of crude ad refined petroleum products, their importations, the peso-dollar rate at which they pay their foreign obligations, and the monthly inventory of their crude and petroleum products," the group said.

It added "We are for oil deregulation. But the regime can be improved through keen competition, encouragement of new oil players who can pool their resources for common storage and docking, and the creation of an IOC."

Earlier, the Office of the President, the finance and energy departments had openly rejected HB 8710.

Energy Secretary Mario V. Tiaoqui said the three leading government agencies have taken a common position against HB 8710 stating that it goes against the already-deregulated oil industry.

Under the present environment, new investments in the industry have reached P10 billion, with another P35 billion earmarked for investments in import terminals, storage, distribution facilities and retail outlets.

"Barely two years after deregulation, new players have captured nine percent of the domestic market, especially the liquefied petroleum gas (LPG) market," Tiaoqui said.

Ironically, these are the same areas, which will be affected with the passage of the HB 8710.

Garcia's bill proposes that the NOEC will take over all existing storage, distribution and terminal facilities nationwide, be it private or otherwise.

"This will destroy government's determined efforts to attract private investors who can generate jobs to alleviate poverty," Tiaoqui said.

Furthermore , he said that an oil exchange plus the physical facilities and inventory will cost government P17 billion.

"This is not feasible considering the current problems in budget deficit," he added.

Meanwhile, one of the new players said the NOEC and the OPEC will prove to be "a lethal mix of high prices, huge state spending funded by taxes, and chronic budget deficits."

Total Petroleum Philippines Corp. (TPPC) president Jean Jacques Jung said the NOEC "matches the notoriety of OPEC."

Jung said the oil exchange proposal overlooks the reality of the OPEC supply curb which is the principal reason for high crude oil prices and subsequently higher petroleum products like gasoline.

Furthermore, the NOEC introduces conditions which negate the gains obtained under the oil deregulation law thus restoring a monopoly in the purchase, distribution and storage of crude oil, he added.