Fuel subsidy mulled for PUVs

Malacañang said yesterday it is seriously studying the possibility of temporarily subsidizing pump price discounts that will be extended to public utility vehicles as world crude prices threatened to reach record highs due to conflicts in the Middle East.

Presidential chief of staff Michael Defensor said the plan aims to complement Executive Order No. 527, which President Arroyo issued in May to cushion the impact of escalating crude prices in the world market on local pump prices. The EO reduced the three percent oil tariff by one percentage point depending on the price level of crude oil.

Defensor said the proposed subsidies will allow the government to increase the P1 discount on diesel to public utility jeepneys that is being extended by some oil companies.

"A form of price stabilization fund was discussed (in the Cabinet) as part of the remedial measures like the OPSF (Oil Price Stabilization Fund) set up but in the form of discounts," Defensor said in a news briefing.

However, Defensor said the proposal was not like the OPSF instituted in the 1980s, where the government subsidized oil companies to prevent them from passing price increases for crude oil on to consumers.

He said the government will use the new proposed stabilization fund for "discounting purposes" rather than by allocating separate funds at certain levels where the old OPSF intervened.

Defensor said this move will allow ongoing discounts to public utility vehicles (PUVs) to be increased and require all oil companies adhere to the discount. If implemented, the subsidies will only be for the short term, he added.

He said the subsidies could be extended to tricycles and other forms of public transportation and that the proposal was already discussed in the Cabinet. The Department of Energy (DOE) has been asked to study the feasibility of the suggestion, including the "trigger prices" at which the subsidies will kick in.

Defensor said the Department of Trade and Industry (DTI) is also constantly monitoring the prices of basic commodities in light of the rising fuel costs.

He also said the long-term measures implemented by the government to reduce the country’s dependence on imported crude oil will only take place over the next two to three years.

According to Defensor, processing plants for jatropha and other plants to extract and process plant-derived diesel and ethanol are still being set up and Congress has yet to approve the proposed Bio-Fuels Act, which the President certified as urgent earlier this year.

Press Secretary Ignacio Bunye on Sunday said the country can survive the onslaught of the raging oil prices as long as all concerned sectors work together in implementing short-term and long-term measures to reduce the country’s dependence on imported crude oil.

"Time and again, we have gone through the challenges of global oil crises and we are confident that our country will be able to weather (these new crises)," Bunye said.

"We will not cease in our efforts to mitigate the impact of rising oil prices on the lives of our people as we pursue our long term goal to promote the use of alternative sources of energy," he added.

Meanwhile, Consumer and Oil Price Watch (COPW) chairman Raul Concepcion urged Independent Philippine Petroleum Companies (IPPCA) president Glen Yu to be more careful about his projections of oil price increases so he will not "send wrong signals and create panic" among consumers.

Concepcion issued this statement after prices of crude oil in New York surged to $78 per barrel Friday on speculations that the conflict between Israel and the Hezbollah may spread to more countries in the Middle East.

Last week, Yu, who is also president of Seaoil Philippines Inc., projected that fuel prices in the Philippines may increase by at least P8 per liter come September if tensions affecting world oil prices continue.

Yu’s projections translate into 11 weekly increases of 50 centavos or more per liter starting on July 22 and continuing until the end of September.

Concepcion said analysts and consumers must "look at the situation on a weekly basis and see the movement of oil prices in the world market rather than make statements (about) what would happen if the situation persists until the end of September."

Consumers and motorists are already "lost" with regards to how they can cope with "escalating world oil prices," Concepcion said, adding that "such projections would just (add) alarm to the situation, especially when oil is such a critical item."

COPW, in its statement, urged the DOE to "strictly enforce the provisions under Section 14 (d) of the Oil Deregulation Law and DOW Memorandum Circular of June 2005, which state that oil companies are required to file a notice with the (DOE) on oil price adjustments at least one day prior to (the price hike’s) effectivity."

According to the statement, COPW "will meet with DOE and the oil companies to clear the issue, in light (of the fact) that the House (of Representatives) committee on transportation is calling for an investigation."

The COPW also said it will "present its position to the House committee, especially now that the public transport sector has submitted its petition for a fare hike increase due to escalating world oil prices." — Paolo Romero