Gas price freeze lifted

MANILA, Philippines – President Arroyo has ordered the lifting of the price freeze on petroleum products and basic commodities, effective Monday, after making oil firms and traders promise to recover their losses on a staggered basis, stabilize prices and supply of goods, and put in more investments and programs for the poor.

Mrs. Arroyo announced her decision yesterday at the end of an emergency meeting at Malacañang with representatives of oil companies, chambers of commerce, distributors and retailers as well as officials of labor and transport groups two hours before her scheduled departure for Singapore for the Asia-Pacific Economic Cooperation (APEC) Leaders’ Summit.

“I shouldn’t leave the country without addressing the issue of Executive Order 839. I want to assure our investors that the price controls were our temporary response to the calamities, and the private sector is viewed as a partner, not an enemy or a nuisance, by the state,” Mrs. Arroyo said.

EO 839 froze pump prices at Oct. 15 levels in Luzon, which is still officially under a state of calamity.

“We hope there will be no drastic increases when we lift the EO. And if the world market dictates increases, you make it on a staggered basis over time,” she said.

The Chief Executive set three conditions for the lifting of the EO to cushion the expected surge in fuel prices.

First, the oil firms must provide some form of subsidy or discount in selected areas, particularly those hit by the recent natural calamities.

The companies should also recover their reported losses or adjust to changes in global crude prices on a staggered basis.

The oil firms should also increase their investments in the country to spur economic activity and create jobs.

“Please comply with the conditions we set today,” Mrs. Arroyo said.

“The bottom line is that we would like fares to remain the same in the next six months, assuming that world markets remain stable. If international pump prices become very high, then we can review this policy,” she said.

Edgar Chua, chairman of Pilipinas Shell Petroleum, told the President that his company would also be willing to revive its discount coupons for liquefied petroleum gas for poor households.

Petron Corp. vice president for legal and external affairs Jose Laurel cited a $500-million expansion project of the company in the Philippines.

Federation of Jeepney Operators and Drivers Association of the Philippines (FEJODAP) president Zenaida Maranan appealed to the oil firms to hold off increases until after Christmas, but the oil firms made no commitment.

FEJODAP and other transport groups, meanwhile, promised to hold off any fare hikes – at least in the next six months – as long as oil firms keep their commitments on discounts and staggered price increases.

“If we poor jeepney operators and drivers can sacrifice by not increasing fares, why can’t you giant oil firms do the same? With 50,000 jeepney units plying and consuming 30 liters each, that is already about P1.5 million in income for oil firms every day,” Maranan said in Filipino.

It was agreed during the meeting that details of the price adjustments and subsidies would be finalized over the weekend.

“The DOE (Department of Energy) and the oil firms are given the weekend to go back to the drawing board and make their calculation or formula (on the price increase),” Justice Secretary Agnes Devanadera said.

“They (oil firms) faced the President and they committed that increases of prices would be staggered,” she told reporters at a press conference.

It was also agreed that trigger mechanisms would be set to regulate fuel price adjustments due to changes on prices of crude in the world market.

“We are prepared to help. We can sit down and work on trigger mechanisms instead of a blanket agreement so we do not unnecessarily raise expectations of the public,” Chua said.

DTI’s warning

Trade Secretary Peter Favila, who also chairs the National Price Coordinating Council, also announced that price controls on basic and prime commodities would be removed effective Monday.

“The President agreed that there are three conditions that we have set: one is to ensure there is adequate supply and reasonable pricing, meaning to say there is no hoarding and no profiteering, and there is discipline within the market, and for businesses to police their own ranks and help the government in monitoring the behavior of these prices,” Favila said at the meeting.

“Mrs. President, I will not hesitate to re-impose the price controls if these conditions are not met and retailers overprice (their goods),” he said.

Among the goods covered by price controls – imposed following the declaration of the state of calamity last month – are rice, canned sardines, fresh pork, poultry meat, fresh eggs, processed milk, luncheon meat, corned beef, meatloaf, flour, vinegar, soy sauce, fish sauce, candles, soap, construction materials including hollow blocks and cement, and funeral services.

Philippine Association of Supermarkets Inc. secretary-general Federico Ples gave assurances that his group would comply with the conditions.

Some of the business representatives present during yesterday’s meeting were Miguel Varela, chairman of the Philippine Chamber of Commerce and Industry (PCCI) and the Employers Confederation of the Philippines; Francis Chua of the Federation of Filipino-Chinese Chambers of Commerce and Industry Inc.; Presidential Special Trade Representative and PCCI official Donald Dee; Consumer and Oil Price Watch chairman Raul Concepcion; Fernando Martinez, president of Eastern Oil and the Independent Philippine Petroleum Companies Association (IPPCA), and Alex Aguilar of the Trade Union Congress of the Philippines.

Mrs. Arroyo also instructed Favila and Energy Secretary Angelo Reyes to help transport groups set up a consortium that would allow them to directly import fuel.

Favila said the National Development Corp. and the Philippine International Trading Corp., both government corporations, will help put up capital for the venture.

Devanadera said the President ordered the lifting of the oil price freeze upon the recommendation of the joint task force on oil composed of the DOJ and the DOE.

“There is no more state of emergency in Luzon. But the state of calamity stays because it is important in recovery efforts, especially in funding,” she explained.

Devanadera said she believes that EO 839 has achieved its purpose and benefited the public.

“People in emergency areas had relief of some sort. It was an awakening for all sectors that during calamity something can be done,” she said. “It also showed overall teamwork between the government and oil firms. Although there were misunderstandings, in the end it is the people who won,” she said.

“What was clear is that the oil companies want to reach out to the poorest of the poor,” Devanadera said.

Relieved

“We welcome the move of President Arroyo to lift the EO. We are glad that this is over,” IPPCA chairman Martinez said.

Martinez said the oil companies have agreed not to increase their prices on a one-time basis. Earlier estimates showed that consumers may have to bear P4.50 to P5 per liter increase in pump prices once the EO is lifted.

“As to how much the first increase in price on Monday will depend on competitive forces,” he added.

But Martinez said he could not say how much discount the oil companies would be willing to provide in calamity areas.

“We can’t decide yet until after we have been able to reflect the true costs of petroleum products. It’s very difficult to say at this time,” the IPPCA official said.

According to Martinez, the P1-billion fund which was earlier set aside by the government to assist the transport group in conversion to LPG may also be tapped to help cushion the impact of the expected surge in oil prices in the next few weeks.

“The government may look at giving as a subsidy a portion of this P1-billion assistance,” he said.

Martinez suggested that assistance or subsidy could come in the form of discount coupons for legitimate transport groups.

“This discount coupon had already been thought of before. This will help shield the transport sector from the increase in oil prices,” he said.

LPG Marketers Association president Arnel Ty, on the other hand, said consumers have suffered as a result of the delay in the repeal of EO 839.

“It took them one month to lift it. The result for LPG is that we will feel the tightness of supply and it will be up to December or even up to January,” Ty said.

Meanwhile, former socioeconomic planning secretary Ralph Recto rebuffed claims by his successor Augusto Santos and DOE’s Reyes that his assertion of an P8 per liter overprice in fuel price was baseless.

“My contention is not without basis. The NEDA technical staff utilized a method of comparison and computation in order to arrive at an estimate of how much fuel prices should be in April of this year. Comparing it to the prevailing cost at that time, there was reason to believe we are being overcharged by oil companies,” Recto said. –Paolo Romero (The Philippine Star) with Donnabelle Gatdula, Edu Punay, Jaime Laude