Oil supply to be depleted in 2 weeks – Sec. Reyes

Supply of imported fuel products would only last for two weeks as oil firms continued to take a hit from Malacañang’s grip on fuel prices, Energy Sec. Angelo Reyes said Monday. During an industry meeting, Reyes cited projections made by the Department of Energy (DOE) that the supply of imported petroleum finished products, which constitute more than 90 percent of total local requirements, would only be enough to cover eight to 13 days’ demand.

“Our estimation in DOE is inventory is between eight to 13 days. The average inventory for the year has been 21 days for finished products. After 13 days, we will run out of finished-product inventory,” he said.

The looming fuel shortage seemed to have stemmed from Malacañang’s issuance of Executive Order 839, which put price caps on pump and liquefied petroleum gas products in Luzon.

Oil companies have been forced to stretch their current inventories in lieu of importing because it would mean selling at a loss on their part.

Industry officials said that prices were already P4.50 to P5 a liter lower than international prices and may soon affect importations of oil firms if Executive Order 839 was not lifted.

According to them, “independent players” or Filipino-owned oil companies that entered the market upon oil deregulation a decade ago would be hit harder if the price caps were not removed.

Imports trickle in

Ramon Villavicencio, Flying V chairman, said, “I said earlier that I have an importation coming despite the fact that it was a losing proposition. But just a few minutes ago, the bank called and said ‘good luck’ because it seems that the banks know this. If that’s true for me, I guess it would be true with the others.”

The country’s oil refiners said that they only have enough supply for a marginal increase on top of their own requirements and thus would not be able to fill the void should Flying V and other importers stop selling.

“Actually, when we plan refinery plans, there’s normally two to three months’ lead time . . . so, if there’s a sudden surge in demand, we cannot cope. So we cannot be expected to cover the shortfall if the others stop importing,” said Edgar Chua, Pilipinas Shell Petroleum Corp. country chairman.

The country’s largest and only other oil refiner, Petron Corp., agreed.

Eric Recto, Petron president, said, “If the supply situation becomes critical as a result of the non-importation of finished products from some of the importers, then Petron from its refinery will not be able to supplement the supply.”

“We cannot cope with this increased level of demand coming from our dealers because we only have so many logistical assets that can service them,” he added.

Executive Order 839 which was issued by President Gloria Arroyo after several typhoons brought parts of Luzon to their knees, has forced retail outlets to cut shifts, lay off workers, shorten operating hours or limit their sales so as not to exhaust their inventories.

Such moves arose from wholesale customers in Luzon buying from retail outlets to take advantage of lower prices.

Dwindling stock

In a joint statement issued by the separate dealers’ associations of Petron, Shell and Chevron Philippines Inc. (formerly Caltex), the “Big 3’s” dealers said that smaller independent gas stations can be expected to experience to run out of stock much earlier that their member-dealers.

Running out of stock, the dealers added, destroys the very intent of the Oil Deregulation Law—to encourage competition that helps reduce prices.

“We are certain as well to experience stock outs, disturbing the regular supply of fuel to public and private motorists, affecting also the transportation of goods and services. As of this writing, in fact, stock outs have already resulted in the temporary closure of some of our gas stations,” they said.

Flak from multinationals

The Executive Order (EO) has also started to draw flak from multinational firms that constitute bulk of the local petroleum market.

“It concerns us that the ground for the EO’s issuance was a national emergency due to the typhoons, and this is a country visited by more than 20 typhoons a year. We want to know exactly what is happening—the question has to be answered whether the market is regulated or deregulated, because we believe we are now regulated,” said Patrick Libihoul, Liquigaz Philippines Corp. president.

Pilipinas Shell’s Chua said, “It’s not a question of what signals we are getting from them but what signals we are sending.”

Amid outcry from industry stakeholders, Energy chief Reyes said that Malacañang would be holding a Cabinet meeting today to tackle the effects of Executive Order 839 and urge the public not to panic with the threat of a fuel shortage.

“We will be attending a Cabinet meeting tomorrow, we don’t know if it’s going to be decided there [lifting of Executive Order 839]. I don’t know. Now, what message do we give? Don’t panic, relax lang. Kayang-kaya ‘to [We can easily overcome this],” he added. –EUAN PAULO C. AÑONUEVO, REPORTER, Manila Times