Oily issues in 2009

High oil prices remained a national concern and problem in 2009.

Early this year, the Big Three – oil companies Shell, Chevron and Petron faced legal complaints from the Social Justice System (SJS), as the cause-oriented group filed a petition before the Court demanding the major oil players open their books, and a separate petition for the removal of oil depots in Pandacan, Manila. The SJS also demanded the resignation of Department of Energy (DoE) Secretary Angelo Reyes for failing to make public the inventory of local oil supply.

The court issued an order favoring the SJS petition to open the book of accounts of the Big Three. Metro Manila Regional Trial Court Judge Silvino Pampino Jr. ordered the Commission on Audit (COA) and the Bureau of Internal Revenue (BIR) to audit the Big Three, but the oil companies and the Office of the Solicitor General filed separate motions for reconsideration.

In a series of congressional hearings, the Big Three said they were willing to cooperate with the government and open their books for public auditing. However, they continued to fight the Court order through legal means.

Unprecedented oil price hikes continued throughout the year. Owing to the deregulation law and increasing world crude prices, local oil companies frequently raised pump prices, to the detriment of the transport sector and consumers.

Former National Economic Development Authority (NEDA) chief Ralph Recto maintained that local oil products were overpriced by Php8. This resulted in a word war between Recto, Secretary Reyes and oil executives.

Many sectors and individuals, including several 2010 hopefuls, and presidential son Rep. Juan Miguel "Mikey" Arroyo pressed for the review of the oil deregulation law.

Legislators said oil deregulation should be repealed and all its effects on the oil industry reversed. They demanded that the government place Petron under state control to pave the way for the eventual nationalization of the oil industry.

The oil price hikes continued even as the country was devastated with back-to-back calamities Ondoy and Pepeng.

This prompted Malacanang to issue Executive Order 839 (EO 839), temporarily freezing oil prices in Luzon to October 15 levels, a week after Pepeng’s last landfall. The price freeze was made, according to Arroyo’s EO, “to respond immediately to the clamor of the Filipino people to prevent unreasonable increase in the prices of petroleum products during a state of calamity.”

Oil companies followed the order but threatened a supply crisis and heavy losses if the price cap continued. Some gas stations in Metro Manila even closed shop as the supply started to dwindle. After three weeks of implementation, the joint DOE-DOJ task force recommended the lifting of the price ceiling.

As soon as EO 839 was lifted, oil companies began to raise their prices again. Malacanang said oil companies would continue to provide fuel discounts to allow transport groups to keep fares down for six months. But various transport organizations already asked that the minimum fare be raised by 50 centavos to Php7.50 as they cannot cope with the rising cost of oil and basic goods.

International prices continued to increase during the last quarter. Prices reached up to US$82 per barrel. Analysts projected that prices could reach US$90/barrel before the end of the year because of the weakness of the dollar. They said fragile global economic recovery and weak dollar should push, OPEC producers may have to reassess the market situation. Oil prices could even surge next year.

Right now, specific proposals to overhaul the local oil industry and put a brake on overpricing by big oil firms remain unconsidered.

Among the proposals are: 1) centralization of oil’s importation under the government’s hands to pin down cheaper sources of oil or alternatives; 2) forging of special agreements with government-owned oil companies abroad; and 3) establishment of a buffer fund that will be financed by the government’s earnings and savings in its increased participation in the downstream oil industry.

Photo: “old school oil pumps - 4723” by Zer Cabatuan, c/o Flickr. Some Rights Reserved.

Add this page to your favorite Social Bookmarking websites