A senior lawmaker is urging the Department of Energy (DOE) to take more “decisive measures,” including establishing its long-planned national oil reserve, amid global fuel price spiral.
Camarines Sur Rep. Luis Raymund Villafuerte said an oil reserve plan would ensure the adequate supply of fuel in the domestic market, as the country has no oil stockpile to offset the impact on petroleum prices in the global market of low crude oil production among the Organization of the Petroleum Exporting Countries Plus (Opec+).
Villafuerte issued the statement as retail prices of petroleum products have gone up for 8 weeks in a row last week amid a supply deficit that is expected to last until the year end coupled with rising fuel demand across the globe brought about by higher Covid-19 vaccination rates, leading to easing travel restrictions and further reopening of economies.
“The DOE needs to do more than just appeal to oil companies to make sure that we have enough supply of oil. Had the DOE accelerated its plan to establish an oil reserve, we won’t have this problem now, which is currently driving up fuel prices in the domestic market,” Villafuerte said.
Villafuerte had called on the DOE almost two years ago to push through with its plan to set up its own oil stockpile in the face of the volatile supply and prices of petroleum products.
Last June, he reiterated his call after observing that the vaccine-driven economic recovery in the US and Europe had started to ease travel restrictions and increase demand anew for fuel.
He said oil companies have separately announced that they will implement another round of petroleum price adjustments, citing as reason the insufficient supply of crude oil amid swelling demand in the world market.
According to reports, the Opec+ had rejected the requests of the US, India, China and the European countries to provide additional supply over and above the 400,000 barrels per day to its combined output that the organization earlier committed.
Worsening the current situation is the sharp drop in refinery production by 67 percent year-on-year to 1,284 million liters (ML) in the first half after Pilipinas Shell Petroleum Corp. had shut down its oil refining operations.
Under Executive Order (EO) 134, Series of 2022 and DOE Circular 2003-01-001, oil companies and bulk suppliers are required to maintain a sufficient minimum inventory of petroleum.
Villafuerte said even the National Economic and Development Authority (Neda) had warned that an oil price spiral could lead to higher inflation, given that the country remains a net food and oil importer.
According to Villafuerte, the signing in the second quarter by the DOE and the Japan Oil, Gas and Metals National Corp. of a memorandum of agreement (MOA) on a review and updating of the 2002 Philippine National Oil Contingency Plan should clear the way to the creation and operation of a Strategic Petroleum Reserve (SPR) program.
He said the MOA seeks, among others, to gather data on the domestic supply of, and demand for, fuel products in the past five years; projected demand for the next 20 years; status of state-run and privately-owned storage facilities for crude oil and finished petroleum products; and a review of existing polices on supply for normal demand and for emergency situations resulting from any international or local supply disruption.
The government should study thoroughly what method of oil stockpiling would be best for the country, the logistical requirements involved, and whether crude oil or petroleum products should be stored, Villafuerte said.