Palace to oil firms: Comply or face raps
Palace to oil firms: Comply or face raps
By Marvin Sy (The Philippine Star) Updated October 27, 2009 12:00 AM
MANILA, Philippines - Malacañang has threatened to file criminal charges against oil firms that continue to disregard President Arroyo’s order for them to freeze pump prices at Oct. 15 levels.
Executive Secretary Eduardo Ermita, in a radio interview, noted that Mrs. Arroyo’s Executive Order 839 issued last Friday also authorized the departments of justice and energy to file charges against stubborn oil firms.
“(Justice) Secretary (Agnes) Devanadera has told me that she will not hesitate to compile evidence and file cases, and we hope that they do not have to look into the books of the oil companies to find out if they are complying with the benchmark price ordered under EO 839,” Ermita said in Filipino. He didn’t specify the charges that could be filed against errant oil firms.
Under the EO, a joint DOJ-DOE task force created under the Oil Deregulation Law would monitor the compliance of the oil firms with the order of the President and “institute complaints against violators of this directive and the provisions of RA 8479.” Republic Act 8479 is the oil deregulation law.
Ermita said the President issued the EO to protect the interest of consumers, especially at this time when the country is still reeling from the effects of recent destructive typhoons.
He said that the President wanted the oil industry to know that “the government is not without power to be able to regulate when the interest of the greater majority is at stake.”
Unioil Petroleum Philippines Inc. was the first to comply with the EO, followed by Flying V. Unioil has reduced pump prices by as much as P2 per liter.
Seaoil announced a P1.25 to P2 rollback effective today in Luzon.
Chevron, for its part, said it would also roll back its prices to Oct. 15 levels in Luzon.
“This is the first time that we are undertaking such a move. And while Chevron will comply with EO 839, this does not prejudice such other legal options and remedies there are for us to explore,” Chevron said.
Ermita said he would personally call officials of Petron Corp., which is partly government-owned, to convince them to follow the EO and set an example for other players.
Deputy presidential spokesperson Anthony Golez, for his part, urged the public to patronize compliant oil firms.
“They should be patronized because they are selling their products at lower prices so the consumers would appreciate this,” Golez said.
Justified
Devanadera said the government under the Oil Deregulation Law is authorized to take drastic measures to protect consumers, including taking over recalcitrant oil firms.
“In times of national emergency, when the public interest so requires, the DOE may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any person or entity engaged in the industry,” Devanadera said.
She stressed that freezing oil prices is different from price controls.
“This is just temporary and will be in effect for a specific concern and specific area. I appeal to the oil firms to just respond to the calamities and give up a little,” she said.
“If they don’t follow, then we can proceed with investigation.”
Ready to comply, but…
Oil companies said they are ready to revert pump prices back to Oct. 15 levels but warned of supply problems in the next few weeks.
The oil firms voiced their commitment as well as their warning during a meeting with Energy Secretary Angelo Reyes.
“We have no alternative but to follow it (EO). We cannot have a situation where an issuance has been made and compliance is optional,” Reyes said. “Compliance to any law or any presidential issuance is mandatory. So we will implement this law. Otherwise we will have anarchy,” he said.
But oil importers present during the meeting said a supply shortage looms in the next two weeks. Importers normally have two weeks’ inventory, while refiners have 30- to 40-day stocks.
“It will have implications on future investments, I can guarantee you that,” Total Philippines country chairman Ernst Wanten said at the meeting.
“And we have questions about the next supply shipments we have to buy because at this time it’s a straight loss. And we’re going to a situation where it’s better not to sell,” he said.
Independent Philippine Petroleum Companies Association president Fernando Martinez said Mrs. Arroyo’s order would set a bad precedent.
“This has never happened before, even in the time of President Marcos,” Martinez said.
“We will study our legal options in consultation with the rest of the industry players,” he said.
“Flying V will assure that our pump prices will be within the Oct. 15 suggested retail price (SRP) levels. The immediate positive effect of the EO is that the planned P2 per liter increase this week will be deferred indefinitely in Luzon,” Flying V chairman Ramon Villavicencio said.
“However, we shall adjust prices in other areas to reflect the previous week’s MOPS movement this week,” he said. MOPS stands for Mean of Platts of Singapore.
Shell country chairman Edgar Chua said that if a supply shortage results from the price freeze, consumers should face the prospect of “cheaper petroleum products that are not available.”
Petron public affairs manager Virginia Ruivivar said they are in fact planning more than P1.50 per liter price increase for diesel this week.
‘Artificial’ shortage
But Rep. Vigor Mendoza of 1 Utak Transport group said the oil companies might simply limit distribution of their products in response to the EO.
Mendoza told The STAR that operators of the 35,000 provincial and metro buses are now complaining of dwindling diesel supply. He said the situation might deteriorate in the coming holidays.
Mendoza said a temporary supply shortage took place last year when the prices of oil in the world market reached $132 per barrel.
“We hope the government can come up with an urgent measure to address the looming crisis,” Mendoza said.
The militant transport group PISTON, meanwhile, called on Malacañang to expand the scope of the EO to cover the entire country.
“It should be nationwide because the price of oil is higher by P5 to P7 in the provinces,” George San Mateo, PISTON secretary-general, said.
“Although we were gladdened by the move of Flying V and Unioil of rolling back their prices from the hike they previously imposed, we believe that this loses significance if they will be the only ones to do a rollback because it will not be enjoyed by a wide number of drivers and citizens,” San Mateo said.
Incentives
Speaker Prospero Nograles, meanwhile, proposed that small oil companies be given more incentives to enable them to compete with the “Big 3.”
“It’s time to teach the big players a lesson by building their competition, which is the only language they understand. Profit taking is their religion and the government must now drive a hard bargain and support the small ones,” he said.
Nograles conceded that the Oil Deregulation Law failed to do away with the “monopolistic practices or cartelization” among oil companies.
However, he said the Senate and the House of Representatives don’t have the time anymore to amend the law as the May 2010 elections draw nearer.
Instead of an amendment, he said the government “must now consider drastic measures to ensure that the Big 3 are forced to keep their prices within the bounds of reason.”
He suggested that representatives from Malacañang and Congress sit down to consider incentives that would help small oil firms engage their big counterparts in direct competition.
Nograles said such incentives should encourage small oil companies to open more service stations and to import more petroleum products.
“Right now, we have no choice but to patronize the Big 3. They have more stations nationwide and we can hardly find small players. We should encourage these small players to expand by building more service stations,” he said.
“If they can bring down prices, they can force the big companies to follow. Today, the big players get the incentives. Yet, they blatantly abuse and hoodwink the system with people at the losing end,” Nograles said.
Sen. Manuel Villar, for his part, said it will take political will for President Arroyo to implement her own EO.
“It’s in the leadership,” he said. “If you’re the president you should be followed. I think the president can do it,” he said.
“A president should assert his or her authority over such matters,” Villar told reporters.
No excuse
The Oil Deregulation Law aims to enhance competition in the downstream oil industry and not to justify unfettered increases in prices, a civil society group said.
“Thus, though the industry is deregulated as of the moment, the pegging of pump prices of petroleum products should be circumscribed within the legal parameters of the Oil Deregulation Law,” Vladimir Cabigao, legal counsel of Social Justice Society (SJS), said.
Cabigao said that under the oil deregulation law, the DOE is required to maintain a schedule of present and future inventory of petroleum products for the purpose of determining the level of supply.
The law requires importers, refiners, and marketers to submit monthly to the DOE records of actual importation, consumption and other data.
He said that with this requirement, oil firms cannot just raise prices as they wish.
“If the oil companies would continue to be stubborn in disobeying the legal processes and lawful orders of duly constituted authorities, we suggest that Congress should revisit the Oil Deregulation Law and empower the Bureau of Customs, Bureau of Internal Revenue and the Commission on Audit to open and examine the books of account of the oil companies every month to check if the oil companies are violating the anti-trust provisions of the Oil Deregulation Law,” Cabigao said. — With Edu Punay, Jess Diaz, Rainier Allan Ronda, Perseus Echeminada, Christina Mendez, Sandy Araneta, and Donnabelle Gatdula