Eurozone woes seen to pull fuel prices down

MANILA, Philippines - Fuel prices are expected to trek downward in the short term as the euro zone continues to face debt woes, an energy expert said yesterday.

“In the short term, the band for pricing is $90-110 [per barrel], possibly the tendency based on what is happening in Europe is a little bit on the downside,” said Jorge Montepeque, global director for markets reporting of energy research firm Platts.

“We are now roughly at $100 [per barrel]. Are the Europeans expected to fix their budgetary problems? Probably not,” Montepeque said on the sidelines of the Platts Forum on Oil, Coal and Liquefied Natural Gas.

Montepeque said demand and prices will increase if the euro zone can solve its problems.

Early this week, the country’s major and independent oil players jacked up pump prices of regular and premium gasoline by P1.80 and P1.55 per liter, respectively.

The oil firms also marked up prices of both diesel and kerosene by P1.40 per liter, snapping 13 consecutive weeks of rollbacks, due to higher prices abroad.

The general mood is stable as downside pressures are cancelled by the geopolitical crisis in the Middle East like the embargo against Iran oil, Montepeque said.

“I see a balance, it almost seems that in the short term the oil prices will be in the $100 [per barrel] range,” he said.

Recently, prices of oil increased due to the labor strike that disrupted oil production in Norway, the agreement of Germany to financially aid debt-ridden Spain and Italy, and the European oil embargo.

Meanwhile, an energy official said oil prices in the Philippines remain competitive with countries that do not subsidize fuel prices.

Zenaida Monsada, oil industry management director of the Department of Energy (DOE), said prevailing pump prices in the Philippines are at P39.80 and P47.95 per liter for diesel and unleaded gasoline, respectively.

These are cheaper compared with P51.58 per liter of diesel and P85.51 per liter of unleaded gasoline in China, P47.91 per liter of diesel and P64.10 per liter of unleaded gasoline in Singapore, and P61.37 per liter of diesel and P85.51 per liter of unleaded gasoline in Hong Kong.

“Subsidies are misallocation of resources. It is essentially throwing money away,” Montepeque said.

In a general economic standpoint, subsidies that lead to lower prices will increase demand that will require more subsidies, he added.

Oil demand in the Philippines stands at 300,000 barrels per day, of which only 6,000 barrels are produced locally, data from the DOE show.

The DOE, for its part, closely monitors international prices, conducts regular meetings with transport groups and provides fuel discounts when necessary, Monsada said.