DOE wants Congress to amend Oil Deregulation Law

The Department of Energy (DOE) is urging Congress to amend the Oil Deregulation Law to allow the government to intervene amid the continuous spike in petroleum prices due to tight global supply and high demand.

In separate letters sent to Senator Sherwin Gatchalian and Pampanga Representative Juan Miguel Arroyo, Energy Secretary Alfonso Cusi sought the lawmakers’ help to amend the law “to provide a framework for the government to intervene and address sudden prolonged oil price spikes; require the unbundling of the cost of retail products to determine their true and the passed-on cost.”

Gatchalian is the chairman of the Senate energy committee while Arroyo is his counterpart in the House of Representatives.

The Energy chief cited several reasons for the prolonged oil price spike such as a continuing rise in world market prices resulting from the sudden global increase in demand and an unanticipated lack of supply.

Cusi, citing DOE projections, said global oil demand is estimated at 103.22 million barrels a day as of October 16, 2021 against a supply of 100.32 million barrels per day.

Prior to the pandemic, the latest recorded total worldwide supply is, more or less, 104 barrels a day.

To cope with the supply, the Organization of Petroleum Exporting Countries (OPEC) committed to increase the production and supply of crude oil by 400,000 barrels a day, according to the DOE.

The OPEC will meet on November 4, 2021 to discuss and reassess the situation.

The Philippines, in particular, utilizes the equivalent of 425,000 barrels a day, which is around 0.4% of the world supply, according to the Energy department.

The tight supply and high demand situation is attributed to the surge of economic activities due to the containment of COVID-19 as a result of measures adopted and implemented worldwide such as 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 on oil products in the transportation sector like gasoline and diesel, the Energy chief said.

The Cabinet official also noted the stocking of petroleum products inventories in other countries as winter approaches to cover demand from October this year to March of next year, with stocking expected until February 2021.

Production, likewise, slowed 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 event withdrawal of investments in the development and expansion of the fossil fuel industry,” Cusi said.

He also cited the international sanctions to oil-producing countries like Iran and Venezuela that stopped the drilling of oil companies and the buying of oil products from the said countries as well as the Hurricane Ida, a category 4 storm, that hit the US gulf coast on August 29 which had caused an estimated loss of US crude oil production by as much as 30 million barrels.

With this, the DOE maintains that the unbundling of oil prices would result in greater market transparency by establishing the trends in the prices of oil and finished petroleum products.

This, in turn, would help ensure a level playing field within the oil industry, while upholding the best interests of consumers, the Energy chief said.

To recall, in in May 2019, the DOE issued a Department Circular 2019-05-0008 requiring the unbundling of oil prices for its data gathering and policymaking function.

Due to opposition of oil industry players, the circular has been subjected to an injunction by the Regional Trial Court despite the DOE’s argument that the “unbundling policy” is not violative of the Oil Deregulation Law.

The DOE required the unbundling of the cost of retail products to determine their true and passed-on cost.

Nevertheless, the Energy Department has met with the oil industry stakeholders to ensure supply while the problem persists, and asked if discounts could be extended to the public, especially to the public transport sector.

Supply was assured and some companies agreed to extend discounts to the public transport industry on top of existing discounts currently given like vaccination and loyalty incentives, it said. — RSJ, GMA News