Government must prepare oil rationing plan

Now that government has frozen oil product prices, it must also prepare for the possibility that oil companies will stop importing for so long as the domestic retail price ceiling will mean losses for them. It is prudent for the Department of Energy to now start plans for oil rationing.

I am not being alarmist or siding with the oil companies on this one. I am just being pragmatic about a potential risk that I see in the horizon. I have it from a senior Shell official that even if they have a refinery, they are sourcing 40 per cent of their products as direct product imports from Singapore because of “negative refining margins.” This means over 60 per cent of our supply are within the week or two inventory level and leaves us very vulnerable to a supply shortage if the oil companies decide to just exhaust what they have in country and stop importing thereafter.

When I was with the old Ministry of Energy/PNOC, we took the risk of supply shortages seriously. We had a mechanism in place that could be instantly activated. We even printed ration coupons ready to be distributed to the barangays when the need arises. We had a detailed Manual of Operations that would guide the rationing and were constantly briefing local government officials about it.

 I know our present government has a “bahala na” attitude to risks, as proven by the state of unpreparedness of the NDCC during the last typhoons and floods. But inasmuch as the government effectively repealed the law of supply and demand by fixing the price of oil (and other prime commodities for that matter), it must also be ready not only to implement their directives by hauling private entrepreneurs to court. Government must also be answerable to the people for the shortages that will happen.

It is true that government can take control of oil company operations in an emergency but if the emergency stretches beyond a couple of weeks, private business cannot be compelled by government to continue losing money. The only oil companies who can afford to abide by price control are the oil smugglers who don’t pay the proper taxes anyway. This is why there is a second plan of action that government must quickly put in operation: getting into oil importation itself.

PNOC must now start familiarizing itself with oil trading, importing the oil products we need that could be distributed through the dealer networks of the oil companies who would no longer import the products themselves. During our time, this is easy because we were already doing it through Petron. But Petron is no longer government owned. In fact, Secretary Ermita is wrong to say Petron is partly government owned unless he is referring to a government official whose family is rumored to have bought into Petron.

There is however, something ironic about the whole thing. If rumors are correct on the real private owners of Petron, I think this price control regime will not last long. Once they start feeling the pinch, they will realize that this PR gambit is going to cost them a bit too much. A highly placed Petron official texted me they expect “to lose P20 million a day until stock out.” I do know if that means they will just allow their stock to run out.

I have been watching oil price movements intently on Bloomberg and other business news sources and the trajectory is upwards. One analyst was talking about a hundred dollar barrel soon as the market feels the western economies are really on the road to recovery. It is now at $80 and it took just a short while to get there from the $60 to $70 range of a few weeks ago.

Purely from the perspective of the world oil market, this is the worst time to institute price control. But if we must, let us not forget to do other things like prepare for shortages. Otherwise, things will just get worse, if not chaotic. Hopefully that’s not Ate Glue’s general plan to justify a declaration of a nationwide state of emergency.

FVR’s niece

All I wrote a week ago were a couple of paragraphs and it merited a four page letter to the editor in chief of The Philippine STAR from FVR’s spokesman. This is all I wrote: “The first half of FVR’s watch continued what Tita Cory started and we saw concrete results in terms of increased international confidence in our economy. FVR’s last two years was a downward spiral as scandals started to sprout from the centennial projects to the questionable power generation contracts now at the root of our uncompetitive high power rates.”

I thought I was even being extra courteous to FVR because I believe he has contributed the most among our recent Presidents in terms of showing the path towards economic growth. The response was four pages of PR puff.

FVR must realize that he cannot be ultra sensitive to comments about his watch in Malacanang. While his watch may have been the best among our Presidents thus far, he must not gloss over his shortcomings. After all, the bar for excellence set by his predecessors and successors have been pretty low.

It is not just me. His own niece, Lila Shahani wrote a thoughtful blog the other week on her feelings about FVR’s watch, the contents of which I shared with my friends on Facebook. Lila, a daughter of former Senator Letty, describes herself in her blog as currently working on her doctorate at Oxford and doing consultancies for the UN on the side. I guess she wrote her blog in the hope that FVR does not make another mistake when he takes side in next year’s elections.

She opens that blog with this sentence: “Breaking my silence finally. My new blog, which begins with an open letter – a letter conveying a lifetime of admiration, bewilderment and the occasional sense of dismay – to a beloved uncle.” Lila... my thoughts exactly!

Lila’s blog, featured in Billy Esposo’s column last Wednesday, was more direct than I was or could be. She wrote: “I certainly had questions – questions about human rights during the martial law years, military logging under the Marcos administration, the signing of IPP contracts after the power crisis (and the high cost of electricity for consumers), the San Roque dam, PEA/Amari, the Fort Bonifacio conversion/privatization program, the VFA, the Centennial celebration, the endorsement of Joe de V and the continued support of GMA until the bitter end. I was relieved to learn that you had been cleared of any wrongdoing in the PEA/Amari case, but always wondered whether your decision to endorse Joe de V (which was after all a party decision as well) was inextricably linked to it.”

She continued: “But I finally had to break my silence after having watched the Ondoy aftermath with horror, realizing that our government was as much to blame for the colossal loss of life and habitation in the country as was climate change. As an engineer, you know that the flooding was also due to poor civil engineering, urban planning and zoning; lack of waste management; lack of education and corruption.

“The thought of your supporting Gibo (or even a Villar/Escudero tandem, for that matter, in the event that Gibo has become too unpopular since Ondoy) was finally enough to make me put pen to paper. Without a doubt, Gibo is “incomparably competent,” but then so were Joe de V and GMA, Uncle Ed – and look what happened. I understand that you supported GMA because you wanted macroeconomic stability in the country above all, particularly in the apparent absence of any viable alternatives...”

“To be sure, you would be granted the same type of soft power you’ve been granted during GMA’s administration, but is it really worth it in the end, Uncle Ed? Do you really want to go down in history as the guy who saved GMA after “Hello, Garci” and who continued to hand the country down to its unscrupulous elite from one administration to another? Isn’t the respect of the young – and of history itself – the most important thing, at the end of the day? In my humble opinion, the best way to refurbish the fading Eddie brand now is to do the right thing and heed the will of the people.”

Maybe Lila deserves a 40 page reply from FVR’s PR person or from FVR himself.

Fries

Kumain sa isang sosyal na restaurant sina Erap at FVR. “Give me Swiss Steak and French Fries,” order ni FVR sa ingles.

“And you Sir?” tanong ng waiter.

“The same, Give me sweepstake and first prize, too,” sagot ni Erap.

Boo Chanco’s e-mail address is [email protected]. This and some past columns can also be viewed at www.boochanco.com