The Department of Energy (DOE) has called on Congress to amend provisions in the Oil Deregulation Law to allow the government to address oil price hikes amid high global demand and tight supply.
In a letter addressed to Senator Sherwin Gatchalian and Pampanga Representative Juan Miguel Arroyo, the DOE asked Congress to amend the law “to provide a framework for the government to intervene in the sudden, prolonged oil price spikes, including the unbundling of the cost of petroleum retail products to determine their true and passed-on costs.”
Gatchalian chairs the Senate Committee on Energy, while Arroyo heads the counterpart panel in the House of Representatives.
The DOE cited several reasons for the prolonged oil price spike amid continuing rise in world market prices resulting from the sudden global increase in demand and an unanticipated lack of supply.
It said that the demand, which is estimated at 103.22 million barrels a day (as of October 16, 2021 vs. a supply of 100.32 million barrels/day) is attributed to the following:
- the surge of economic activities due to the containment of COVID-19 as a result of measures adopted and implemented worldwide (i.e. 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 stocking of petroleum products’ inventories as winter approaches to cover demand from October this year to March of next year, with stocking expected until February 2021;
- slowed production 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;
- International sanctions to oil-producing countries like Iran and Venezuela that stopped the drilling of oil companies and the buying of oil products from these countries;
- Hurricane Ida a category 4 storm that hit the US gulf coast on August 29 had caused an estimated loss of US crude oil production by as much as 30 million barrels.
Before the pandemic, the latest recorded total worldwide supply was, more or less, 104 barrels a day.
To cope-up with the supply, the DOE said the Organization of Petroleum Exporting Countries (OPEC) committed to increase the production and supply of crude oil by 400,000 barrels/day.
The OPEC will meet on November 4 to discuss and reassess the situation.
The DOE said the Philippines utilizes the equivalent of 425,000 barrels/day, which is around 0.4% of the world supply.
The department assured it 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 (e.g. Jetti, Seaoil, Shell, Phoenix, Unioil) agreed to extend discounts to the public transport industry on top of existing discounts currently given like vaccination and loyalty incentives,” it added.
The DOE said it required the unbundling of the cost of retail products to determine their true and passed-on cost.
It maintained 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 DOE said.