DOE is correct to focus on supply

Energy Secretary Rene Almendras is correct to focus on assuring oil supply because there is nothing anybody can really do about the price. Loud mouths demanding his resignation because he cannot keep prices down are simply being ignorant and unreasonable.

Not even the members of OPEC can predict and control prices. This is simply market driven. Price control on domestic petroleum prices can only mean government must subsidize the difference between world market price and domestic selling price. The private sector cannot be expected to willingly lose money.

In that same vein, I think Secretary Almendras is being less than candid when he ordered the oil companies to boost their inventories without an offer from government to pick up the increased inventory carrying cost. Only the refiners, Shell and Petron, keep inventories of over 30 days because they import crude oil for processing. The small players who only import products keep at most seven to 10 days. They have not factored inventory carrying costs in their pricing. It is unfair to even threaten them with a fine for failure to go beyond normal inventory levels.

During the 80s, we were able to keep in-country inventory of over 180 days only because government was paying for the inventory carrying cost through the OPSF. Because we didn’t have enough onshore storage tanks, we even chartered VLCCs or Very Large Crude Carriers to serve as floating storage for oil we kept as part of our strategic reserves. We are now operating on a very different system where the government plays no role in the importation of petroleum beyond monitoring.

But I remember that during our watch, we signed up an emergency petroleum sharing agreement with other government oil companies in Asean. Working through the Asean Council on Petroleum or Ascope, PNOC had arrangements with the oil companies in Malaysia, Brunei, Indonesia and Thailand for emergency oil supply. The arrangement was also ratified by the Asean Energy Ministers (ASEM).

I don’t remember any country invoking this agreement at any time despite the many scary threats to oil supply. Today however, it may be difficult to impose the agreement on Indonesia because the country has since become a net importer of oil. Malaysia has limited domestic production and I guess what they produce are already contracted for. Thailand is basically a natural gas producer. Brunei’s production level is no longer what it used to be. So it seems the region can offer little relief for us in an emergency.

We should try signing up government-to-government crude oil supply deals like we did in the past. Diplomatic missions must be launched to convince the Russians to sell us some of the oil produced in their Far East territories. That appears to be the only really viable alternative in case our Middle East sources, where 80 percent of our oil comes from, are cut off. Unfortunately, we have discarded our policy of ensuring geographic diversification of oil supply.

This is why it was wise of Secretary Almendras to dust off existing plans to impose fuel rationing. If all hell breaks loose in the Middle East, rationing may be the only way to go. Since the rationing plan involves using the barangays for the distribution and control of ration coupons, it is good to start training them early because we may need to implement in a hurry.

As for now, the energy department should launch an all out information drive to make people realize the gravity of the potential problem to make them adopt energy saving measures. Whether we end up rationing fuel or not, it will be to everyone’s advantage to get used to making every drop of imported oil count.

Government should lead the drive with the MMDA making sure that traffic management is constantly improved. We can just imagine how much oil is wasted by all those idling vehicles on our streets every day.

Incidentally, I am glad that MMDA is constantly broadcasting the traffic situation in key arteries through Twitter. This will help people make decisions on routes to take and avoid heavy traffic areas. Maybe a more systematic broadcast would enable motorists to better plan their routes even before they get to their cars.

We have been here before… we should be able to handle this better now if we just learn from past experiences. –Boo Chanco (The Philippine Star)