Proposed oil exchange will be another Nasutra, says Petron chief

The proposed National Oil Exchange Corp. (NOEC) will become a government and oil monopoly similar to the National Sugar Trading Corp. (Nasutra), according to Jose A. Syjuco Jr., chairman and chief executive officer of Petron Corp.

Based on the proposal of Rep. Enrique Garcia, Syjuco said "the NOEC will be a monopoly... and monopolies have not been known to assure consumers of reasonable prices and efficient operations."

Syjuco recalled the days when Nasutra was the sole buyer of domestic sugar and sole seller of Philippine sugar in the international market. Formed by the Marcos administration, it turned into an inefficient government monopoly overflowing with corruption that incurred losses amounting to billions of pesos.

He said the NOEC will not mean that government can control the prices of local petroleum products because these are dependent on expensive imported crude oil. Whether the buyer is a government agency or a private entity, the Philippines is and will continue to be an importer of crude oil.

There is an international cartel controlled by the Organization of Petroleum Exporting Countries (OPEC), and these are traded through various international markets, notably the Brent, Dubai and Singapore spot market.

For economic reasons, the Philippines buys most of its crude supply from the Singapore spot market, which generally follows the Dubai prices.

With NOEC, local refiners will be forced to close down since their storage tanks will be in NOEC's hands as proposed by House Bill 8710 otherwise known as An Act Restructuring the Oil Industry by Establishing a National Oil Exchange, and other purposes.

"The country will therefore be solely dependent on imports of refined products. When this happens we would all be at the mercy of international refiners and traders, who will increase or decrease prices as market conditions dictate," Syjuco said in a position paper.

Earlier, Energy Secretary Mario V. Tiaoqui, the Consumer and Oil Price Watch (COPW), Total Petroleum Philippines Corp. (TPPC), Pilipinas Shell Petroleum Corp. (Pilipinas Shell), Unioil, and Caltex Philippines Inc. submitted position papers opposing the formation of an oil exchange.

Tiaoqui said that 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.

The NOEC will not only turn away future investments in the oil industry but will penalize existing local and foreign investments, he added.