MANILA, Philippines - President Arroyo has directed the National Disaster Coordinating Council (NDCC) to review the state of calamity imposed over Luzon in response to calls by the oil industry for the immediate lifting of the price freeze on petroleum products.
Acting National Economic and Development Authority (NEDA) director general Augusto Santos said an agreement was reached during yesterday’s NDCC meeting in Bohol to see if the state of calamity is still relevant in Luzon.
“So that will be the first step, to determine if there is still a state of calamity because that was the legal basis for EO 839,” Santos said.
Executive Order 839 was issued by President Arroyo on Oct. 23, directing the oil industry to keep the prices of all petroleum products at Oct. 15 levels.
The EO was issued after a state of calamity was imposed over Luzon following the widespread devastation caused by storm “Ondoy” and typhoon “Pepeng.”
The price freeze would be in effect for the duration of the state of calamity.
Oil companies and various business organizations aired widespread opposition to the price freeze, particularly the duration of the order.
Some of the oil companies, particularly the smaller players, claimed that their supplies of finished products are running out already because of the price freeze.
This was due to their refusal to import finished products at rates which would result in huge losses on their part because of the price freeze.
Pilipinas Shell even filed a petition before the Makati Regional Trial Court for a temporary restraining order on EO 839, arguing that the order was unconstitutional and should be lifted immediately.
“This will have to be studied by the NDCC. They will have to meet as soon as possible and come out with their decision,” Santos said.
Selective lifting
Press Secretary Cerge Remonde said the report of Justice Secretary Agnes Devanadera on the joint Department of Justice and Department of Energy task force meeting with the oil companies last Monday was also submitted to the NDCC for its consideration.
Devanadera said the other day that the oil companies were amenable to a selective lifting of the price freeze so that only the areas where the effects of the typhoon are still being felt would benefit from lower prices of petroleum products.
However, Remonde said the NDCC has not yet made any recommendations on the proposal of the oil companies.
“It merely received the report of DOJ Secretary Devanadera. The report is being considered for further study,” Remonde said.
50-day oil supply
Parañaque Rep. Roilo Golez yesterday said the country should have at least a 50-day supply of oil products.
He told reporters that when he was President Arroyo’s national security adviser, he made sure that oil companies kept an inventory that could last between 50 days and two months.
“We were monitoring the supply of oil products because this is related to national security,” he said.
Golez said he was surprised to read a statement quoting Energy Secretary Angelo Reyes that the nation’s supply has dwindled to 13 days, or less than two weeks.
“Before the inventory became two weeks, it reached one month first, which was already a critical level. Reyes should have hollered when inventory got close to 30 days, not now,” he said.
“This is gross negligence on his part,” he added.
Senators slammed Reyes and the oil companies yesterday for warning of a fuel shortage in the country because of the price freeze imposed by Malacañang.
Senate Minority Leader Aquilino Pimentel Jr. along with Senators Joker Arroyo, Miriam Defensor-Santiago, Manuel Roxas II and Edgardo Angara said Reyes should not be speaking for the oil companies, especially since the government action to control prices was justified due to the recent calamities that hit the country.
But Senate President Juan Ponce Enrile said the oil companies’ business must be considered, too.
Sen. Benigno Aquino III added the government should also see that oil prices were dictated by the world market and study the dampening effect on the economy of EO 839 to find out if the price freeze could already be lifted.
Pimentel said Reyes’ statements that there might be a shortage in supply but that the people should not panic were contradictory.
Pimentel added any shortage was artificial because there was no such thing in the world market.
“What kind of statement is that? What the government should do is anticipate any shortage in supply and use its resources to import oil if necessary so as not to inconvenience the people,” Pimentel said.
Pimentel, Angara, Santiago and Arroyo said there is such a provision in the Constitution called the general welfare clause where the government could take action to help the people.
“In case of calamity like what we are undergoing, the government can take over the operations of the oil companies,” Angara said.
Ready to supply
The government, through its state-owned Philippine National Oil Co.-Exploration Corp. (PNOC-EC), is confident that it would be able to supply the petroleum needs of the country should oil companies cease importing in less than two weeks.
PNOC-EC chairman Jacinto Paras said if Malacañang will order them to import the needed supply, they will do so.
“If there will be a problem of oil supply as voiced by oil companies, PNOC-EC is ready to supply oil through its various contacts in Asia and the Middle East if allowed by the President,” Paras said.
Paras said they have already been supplying oil to Bangladesh and is about to supply to China as part of their usual business activity.
“Upon query with contacts in Singapore, we can supply within 10 days upon order,” he said.
“We only want to help the government address this problem. We won’t be earning too much from this effort,” he said.
The militant transport group PISTON (Pinagkaisang Samahan ng Tsuper at Opereytor Nationwide) also lambasted Reyes for sowing panic by saying that the oil supply of the country is only good for 13 days.
George San Mateo, PISTON secretary-general, said, “Reyes said that to create unnecessary panic among drivers, motorists and consumers and to strengthen the call of the greedy oil cartel for President Arroyo to scrap EO 839.”
No overpricing, cartelization
The dean of Economics of the University of Asia and the Pacific (UA&P) yesterday told the Manila Regional Trial Court (RTC) that there was no overpricing committed by the Big 3 oil companies – Pilipinas Shell Petroleum Corporation, Chevron Philippines Inc. (formerly Caltex Philippines) and Petron Corp.
During yesterday’s hearing on the “declaratory relief case” filed by the Social Justice Society (SJS) before the Manila RTC Branch 26 presided over by Judge Silvino Pampilo Jr., witness for the oil companies, Dr. Peter Lim U of the UA&P, categorically stated that “there is no overpricing” committed by the said oil companies.
“I basically reaffirmed the results of the study that I did in May 2008. More or less the conclusion was that from 2005 to 2007, the profits of the oil firms seem to be reasonable. Therefore the oil prices are also reasonable,” he said in an interview after his direct testimony in court.
When asked if there was cartelization, Dr. U said he was not sure since there is no proof.
Dr. U said if indeed cartelization can be proven, this is not based on “economic data” or based on similar prices of oil companies.
“These are proven because there is an executive who is disgruntled, fired by the company and he squeals on the authorities. He says that executives of the different oil companies meet and they talk about what price they would put. This is how cartelization is proven, not by similar prices,” he said.
Dr. U cited as “premature” and “inconclusive” the statement of former NEDA Director General Ralph Recto that there was an overprice by as much as P8 per liter.
“This is based on the NEDA website. It is not conclusive to my mind. He is trying to arrive at an estimate of what should be the pump prices, in this case, April 16, 2009. Assuming even if the analysis is correct, this would only establish overpricing of one day,” said Dr. U.
He also said that not all costs were considered by Recto’s study.
He said capital costs not directly imputable to the product such as administrative, marketing and advertising expenses were not included in the study.
‘Conspiracy evident’
Meanwhile, Social Justice Society (SJS) lawyer Vladimir Cabigao said Reyes only shows that “there is a conspiracy between him as energy secretary and the oil companies.”
He said Reyes, instead of scaring the oil companies so that they would follow the executive order, is scaring the public.
“So he is making a scene that if President Arroyo does not lift the executive order, there will be such a scene of shortage of supply. If there will be a shortage of gasoline, he should take the necessary measures to prevent this,” Cabigao said.
The SJS also reiterated yesterday its call for an audit of the books of the country’s three biggest oil firms by government agencies in connection with allegations of cartelization and predatory pricing.
The next hearing is set today and Reyes is expected to appear before the court.
Petron lawyer Gener Asuncion, for his part, said with the testimony of Dr. U, they were able to show to the court that there was no overpricing of oil products.
Remote possibility
A local business group yesterday asked the government to lift the price control on oil at the soonest time possible.
In a statement, Federation of Philippine Industries (FPI) chairman Meneleo Carlos said that price control may only be imposed if there is a likelihood of price manipulation due to possible shortages of a particular commodity.
However, Carlos said there is no likelihood of price manipulation in the case of petroleum products, except in areas that are still flooded and delivery of fuel may be difficult.
As such, Carlos said it is best to lift price controls for oil and other commodities where there are no more floods.
“The federation is emphatically recommending that a constant and thorough review be made, especially considering that petroleum products are traded commodities,” the group said in a statement. - With Ma. Elisa Osorio, Jess Diaz, Sandy Araneta, Edu Punay, Donnabelle Gatdula, Aurea Calica and Rainier Allan Ronda