THE Department of Energy (DOE) is asking Congress to provide the government a power to intervene and address sudden and prolonged oil price increases by amending the Oil Deregulation Law.
Energy Secretary Alfonso Cusi sent a letter on October 18 to the chairmen of the Senate and House Committees on Energy—Sherwin T. Gatchalian and Juan Miguel M. Arroyo, respectively—as the country faces a prolonged oil spike due to the continuing increase in the world market price.
Cusi said amending the Republic Act 8479 or the Downstream Oil Industry Deregulation Law of 1998 is important to provide a framework for the government.
The amendments should include, he said, the unbundling of the cost of petroleum retail products to determine their true and passed-on costs.
According to Cusi, the DOE in May 2019 issued a department circular requiring the unbundling of oil prices for its data gathering and policymaking function.
“[However] upon the opposition of the oil industry players, the circular has been subjected to an injunction by the RTC [regional trial court] despite the DOE’s argument that the ‘unbundling policy’ is not violative of the Oil Deregulation Law,” he said.
Spike
Cusi also cited several reasons for the prolonged oil price spike, noting the sudden global increase in demand and an unanticipated lack of supply.
According to Cusi, the oil demand is now estimated at 103.22 million barrels a day as of October 16, 2021 against a supply of 100.32 million barrels per day.
“The surge of economic activities due to the containment of Covid-19 was a result of measures adopted and implemented worldwide, [including] mass vaccination, control of the Delta and other variants, Europe’s no-lockdown policy, and China’s economic boost.
This led to a sudden demand in energy utilization, including the demand [for] oil products in the transportation sector like gasoline and diesel,” he said.
Also, the DOE secretary said the stocking of petroleum products’ inventories as winter approaches to cover demand from October this year to March of next year, with stocking expected until February 2021.
He noted as well the slowed production due to the current global direction of sourcing energy from low-carbon emitting sources.
“This has limited the optimum level of production, causing the halt and even withdrawal of investments in the development and expansion of the fossil fuel industry,” he added.
Also, Cusi noted international sanctions were imposed on oil-producing countries like Iran and Venezuela that stopped the drilling by oil companies and the buying of oil products from these countries.
“Hurricane Ida, a category 4 storm that hit the US gulf coast on August 29 had caused an estimated loss of US crude oil production by as much as 30 million barrels,” he added.
Before the pandemic, Cusi said the latest recorded total worldwide supply is, more or less, 104 barrels a day.
To cope with the supply, he said the Organization of the Petroleum Exporting Countries (OPEC) committed to increase the production and supply of crude oil by 400,000 barrels/day. The OPEC will meet on November 4, 2021 to discuss and reassess the situation.
The Philippines, Cusi said, utilizes the equivalent of 425,000 barrels a day, which is around 0.4 percent of the world supply.