Me to Ate Glue: Told you so about Petron

When Finance Secretary Gary Teves was hell-bent on selling the 40-percent government ownership in Petron, I wrote in this column that they are making a big mistake. Completely selling out of Petron will shut out government’s ability to properly regulate this vital industry. It also reduces government’s options when push comes to shove in the matter of supply assurance.

Now, I can say, I told you so, Ate Glue! Gary T was desperate to plug the budget deficit and in the process sacrificed a long term principle for short term exigency. The oil industry is like no other in the business sector. It is absolutely vital. And it is complicated. The best way to really understand it is to be involved in it.

I guess a 100-percent government owned oil company is also not advisable. In fact, that may even be counter productive because politicians will feel free to abuse it to the point of bankruptcy. FVR had the right formula: 40-percent government, 40 strategic partner (one who can provide supply assurance and/or technical support) and 20-percent public ownership through the stock market. Now you can say only one group owns Petron and very little public or free float.

A 30-to 40-percent market share for Petron is enough for it to set standards for the rest of the industry. If Petron sets a pricing policy based on FIFO rather than on current cost of supplies or LIFO which is the industry practice even abroad, the others will have to adjust. When I was with Petron during the Velasco days, we were always able to make Shell and Caltex follow our pricing initiatives.

Now, Ate Glue will have to plead with the investors behind the Ashmore buy-in to Petron to work against their interest and take the consumer view in their pricing. She will also have to convince San Miguel, the other big owner of Petron, to do likewise. I am sure Ate Glue can be persuasive when she wants to, but is this something she wants to be convincing about?

Even Petron is now pointing out how they will lose P1.5 billion in Q4 and a careful reading of their press releases shows a disinclination to import beyond what they now have in inventory unless the price cap is removed. That’s just good governance for Petron’s management whose primary responsibility is to their stockholders.

Indeed, here’s something interesting from Platts: “Petron buying only one of the two gasoil cargoes it had originally sought via a tender released on Oct. 23, the same day the government issued the executive order. The oil company had initially stated it was seeking two 250,000-barrel cargoes of 500 ppm sulfur gasoil over Nov. 9 to13 and 22 to 26, but canceled the latter.” If Petron is doing this, it looks like the oil companies are really in no mood to lose money.

I think government, whether this one or the next one should buy back the 40 percent of Petron that Gary Teves sold. Doing so is in the national interest. FVR’s formula is still the best, the most practical approach to the industry. And government must learn from this experience that it is stupid to sacrifice a long term strategic principle for short term exigencies.

Economic laws

I got this reaction to Friday’s column from Eric Jurado, who identified himself as a Money Manager from Manila and Los Angeles.

Economists may dispute many theories amongst themselves, but they all agree on two things: first, that when demand rises or supply decreases, prices will rise; and second, that price controls RESULT in shortages.

You stated that you hope the guys in government know what they are doing. Unfortunately, historical empirical evidence shows that attempts to use government to correct market failure have often simply substituted government failure for market failure.

We should remember the gasoline shortages of the 1970s that ACCOMPANIED government price controls. People may complain paying a lot for gas today, when the market determines prices, but at least we know that we’re unlikely to find a gas station completely out of gas or, as we often saw during price controls, a lack of gas in all the gas stations in the country. Befriending a gas dealer would be hopeless.

I have analyzed countries for major international banks and allocated up to $5 billion in investment funds worldwide. If the Philippine government continues its efforts to constrain economic liberty, no matter how well-intentioned, this will invariably lead to increased poverty and injustice.

Brain gain

Here is the reaction of Rogelio Paglomutan, an overseas Pinoy teaching economics and finance, to the column about brain gain in China and India.

“Vietnam too is experiencing significant reverse brain drain with Vietnamese professionals from North America and Australia now here in their native land contributing to making it a tiger economy. A number of them are my colleagues in Royal Melbourne Institute of Technology-International University in Vietnam (Ho Chi Minh campus of an Australian university).

The Philippines can experience this too if our talented Pinoys abroad will be inspired by good governance/ personalities in the new administration in 2010. Mabuhay!

Award winning

Ruth Marbibi, a gasoline dealer who didn’t find EO 839 amusing, sent this one instead.

John was in the fertilized egg business. He had several hundred young layers (hens), called ‘pullets,’ and 10 roosters to fertilize the eggs. He kept records, and any rooster not performing went into the soup pot and was replaced.

This took a lot of time, so he bought some tiny bells and attached them to his roosters. Each bell had a different tone, so he could tell from a distance, which rooster was performing. Now, he could sit on the porch and fill out an efficiency report by just listening to the bells.

John’s favorite rooster, old Butch, was a very fine specimen, but this morning he noticed old Butch’s bell hadn’t rung at all! When he went to investigate, he saw the other roosters were busy chasing pullets, bells-a-ringing, but the pullets, hearing the roosters coming, could run for cover.

To John’s amazement, old Butch had his bell in his beak, so it couldn’t ring. He’d sneak up on a pullet, do his job and walk on to the next one.

John was so proud of old Butch, he entered him in the Renfrew County Fair and he became an overnight sensation among the judges. The result was the judges not only awarded old Butch the No Bell Piece Prize but they also awarded him the Pulletsurprise as well.

Clearly old Butch was a politician in the making. Who else but a politician could figure out how to win two of the most highly coveted awards on our planet by being the best at sneaking up on the populace and screwing them when they weren’t paying attention.

Vote carefully next year, the bells are not always audible.

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