Price controls on oil products eyed

President Arroyo said yesterday her administration would regulate petroleum prices if global crude oil prices rise due to the looming war in Iraq.

"We would impose price controls on oil products if there is too much speculation," the President said over dzRH radio. "And if we need to impose price controls on oil, we will do so to curb those taking advantage of it."

The government deregulated the downstream oil sector in the 1990s, allowing market forces to set pump prices after decades under a regulated pricing regime.

Mrs. Arroyo told one of the country’s "Big 3" oil companies, the partly government-owned Petron, to keep its prices to a minimum.

"They... should be the last one to raise if they cannot avoid price increases. And if a price increase cannot be avoided, it must not be higher than the rest. And if it is time to lower prices, they should be the first one to reduce their prices," she said.

It was the first time a local petroleum company was told by the government to control its prices since the local oil industry deregulation.

Although the government no longer has direct control over the oil industry, fuel prices remain politically sensitive. In the past, the government has appealed to oil companies, asking them to hold down their prices as long as they could.

Pump prices in the country are at an all-time high. A liter costs more than P21 but prices vary due to the prevailing unregulated environment.

Asked if she would suspend the Oil Deregulation Law in case of war, Mrs. Arroyo said: "If it is necessary, if it (prices of petroleum products) seriously affects the prices of other goods."

She will also impose price controls if oil firms take advantage of the situation. "If there are abuses, we can do that... Price controls are not out of our options."

The Philippines imports all its crude oil mostly from the Middle East.

Government officials earlier voiced concern that a war in Iraq might cause crude oil prices to go up, which might eventually cause prices of basic commodities to shoot up as well.

The President earlier said she expected the Iraq crisis to be "short and temporary" and urged the transport sector to bear with higher costs for the time being.

Some bus firms have petitioned government regulators to allow them to raise fares after pump prices soared to all-time highs amid global expectation that the United States would attack Iraq soon.

Manufacturers of basic goods earlier assured the government that they would hold prices as long as they could.

Officials said the Arroyo administration has already drawn up emergency measures to ensure a steady supply of basic commodities and that prices remain stable in case a war in the Middle East erupts.

Last week, a former Iraqi government official predicted that the Philippines’ oil supply would remain stable even if war breaks out in Iraq.

Issam al-Chalabi, who was once Iraqi oil minister, added that the country’s 70-day oil stock was "sufficient" to help the government avert a shortage.

Chalabi served as minister of oil from 1987 to 1990, shortly after Iraq invaded Kuwait. In 1991 he moved to Jordan, where he now works as a private consultant on global energy, specializing on oil and gas in the Middle East.

Citing price patterns during the 1991 Gulf War, crude oil prices may initially go up if war breaks out but he expects the upward trend to cease soon enough, Chalabi said.

In 1991, prices at first spiked when a US-led coalition began military strikes on Iraq to drive out Iraqi forces occupying Kuwait. However, they went down shortly when it appeared that the war would be brief and not hamper oil production in the Middle East. — With AFP