What goes up doesn't necessarily come down... immediately.
With world oil exporters agreeing yesterday to increase their crude oil production by 1.7 million barrels a day, the Philippines may finally see stable pump prices and even a price reduction.
Local oil company executives emphasized, however, that a fuel price rollback would not come automatically. They pointed out that local pump prices would go down only if the price of crude oil would drop to $21 or $22 per barrel in the next two or three months. Dubai crude was trading at $24.06 per barrel as of March 28.
Petron Corp. chairman and chief executive officer Jose Syjuco Jr. explained that local pump prices are generally determined by five factors: the price of imported crude oil, foreign exchange rate, transportation cost, rate of return on investments and competition.
Pilipinas Shell vice president Rey Gamboa agreed with Syjuco that a sudden drop in the prices of crude oil in the world market will not automatically reflect on local rates.
"We determine our pricing by considering the average price of crude oil in a month," the two executives said. "We have to consider the price movements for the entire March before we can determine the price for April."
Gamboa added that average price increases of 49 centavos per liter implemented in February and 80 centavos in March covered only the purchases made in November and December.
"This did not cover our losses in the same period," Gamboa said.
Syjuco, who was one of the guests at the Greenhills Walking Corp.'s weekly forum at the Ristorante La Dolce Fontana in San Juan, said local prices of petroleum products were principally dictated by world crude prices which have gone up by more than 100 percent since March last year.
Other guests in the weekly forum were Energy Secretary Mario Tiaoqui who is concurrent chairman of the Philippine National Oil Co., the National Power Corp. and the National Electrification Administration, and Napocor president Federico Puno.
Citing upward adjustments of world crude oil prices, local gasoline companies continually increased their pump prices, triggering threats of widespread public transport strike.
Even as a transport strike loomed today, Syjuco was optimistic that the OPEC's decision to increase output by 1.7 million barrels a day - pushed by Saudi Arabia which has the world's biggest oil reserves, and eight other OPEC member-states, with only Iran and two other countries dissenting - would result in crude prices going down.
Syjuco also said the United States had hoped to persuade OPEC to hike production by two million barrels daily which would then result in crude prices dropping by $2 per barrel, but the 1.7 million barrels is gratifying enough.
"The OPEC had to act, possibly because there is a leakage anyway," Syjuco added.
He pointed out that Iraq has been selling oil underground, probably to the extent of an extra one million barrels a day.
Prices of crude oil were registered at $23.11 per barrel in November and $23.65 in December.
Dubai prices, used as the benchmark for crude oil importation by most Philippine oil companies and trading firms, rose from $10.02 per barrel in February last year to $28.41 this month.
Crude cost represents a major portion of local pump prices, accounting for 44.3 percent of last year's price levels, with 38.8 percent representing taxes.
However, crude cost factor went up to 63.2 percent, leaving only 28.4 percent for taxes and 2.8 percent for refinery expenses. The remaining 4.4 percent was allocated for dealer's margin of profit while 1.2 percent went to domestic freight cost.
Before the March price increase averaging 80 centavos per liter, unleaded gasoline sold at P14.49 per liter, while diesel cost P10.38 per liter, compared to Hong Kong's P53.47 per liter for unleaded and P30.29 for diesel.
Crude production worldwide was estimated at 75 million barrels a day, about 41 percent of which came from OPEC member-countries, and 59 percent from non-OPEC states.
For his part, Puno pledged there will be "no more brownouts" of the jellyfish variety, referring to the Luzon-wide blackout last December.
Puno said the government has been slowly moving away from fuel-fired power plants, although most of the country's energy facilities still use bunker fuel, fuel oil or diesel.
The state-run Napocor is the single biggest generator of electricity in the country.
From 41 percent in 1998, Napocor power generation using diesel fossil fuel was down to 23 percent last year, and seen at 11 percent by end-2000.
Conversely, this means heavier dependence by Napocor on alternative power sources.
Tiaoqui said the Department of Energy was also moving in the same direction.
He said in the early 70s, oil accounted for 92 percent of the country's energy mix, with the remaining eight percent divided between hydro-electric plants and new and renewable energy (NRE) sources.
The country reduced its dependence on imported oil to 46.6 percent of the national requirement, while increasing from zero to 13 percent the utilization of coal.
Geothermal energy sources also grew from zero to eight percent, while NRE accounted for 29 percent, up by 26 percent compared to the 1973 level.
However, hydro-electricity went down from five percent of the energy mix in 1973 to four percent last year.
Tiaoqui said the country's dependence on fossil fuel for power generation will be further reduced with the commissioning of the Malampaya natural gas fields within the next two to three years.
He said Malampaya was expected to displace some 65,000 barrels of imported crude oil valued at P1.6 billion per day, resulting in huge foreign currency savings for the country.
Authorities admitted, however, that such projected dollar savings would become virtually irrelevant if the Comprehensive Energy Reform Bill which seeks to privatize Napocor, among others, is not enacted.
Tiaoqui said privatizing Napocor would relieve the government of a heavy financial burden. "Otherwise, the government will have to recapitalize Napocor to the tune of P400 billion for it to stay afloat," Tiaoqui said. -