State of Emergency

MANILA, Philippines—Oil companies said they would follow a Malacañang order to bring down fuel prices to their levels 12 days ago, but warned of a possible supply shortage.

“We will comply. We have no choice, but [the executive order] has serious implications not only to the supply of products in the country, but also to investments,” Edgar Chua, country chair of Shell companies in the Philippines, said at Monday’s meeting with officials of the Department of Energy (DoE).

Fer Martinez, president of Eastern Petroleum, said the industry’s fuel supply would be threatened because of the order.

“Already, Flying V Philippines and Total Philippines said they are canceling their importation [of petroleum products]. That’s dangerous, when people stop selling,” he said.

The oil companies said they would also suffer revenue losses as a result of Executive Order No. 839, which directs them to bring down prices to their Oct. 15 levels. President Gloria Macapagal-Arroyo issued the order on Friday.

On Oct. 20, prices of gasoline were raised by P1.25 a liter and those of diesel by P2 a liter.

State of calamity

The order freezing oil prices will last while the state of calamity the President has declared “in the entire Luzon” is in effect. Ms Arroyo issued the order in the wake of the recent storms that devastated large swaths of Luzon, including Metro Manila.

Anthony Golez, the President’s deputy spokesperson, said EO 839 would be “strictly implemented” both by the DoE and the Department of Justice (DoJ).

Executive Secretary Eduardo Ermita said he would phone officials of Petron Corp., which is partly owned by the government, to “set a good example” to other oil companies.

“They should be the first to follow the President’s executive order,” he said in a radio interview.

Unreasonable pricing

In the order, Ms Arroyo said the government had to “respond immediately to the clamor of the Filipino people to prevent unreasonable increase in the prices of petroleum products during the state of calamity.”

“The government must exercise the powers conferred upon it within the limits set by the laws to prevent predatory pricing, unreasonable pricing, cartelization, among others, which the oil industry players may resort to,” she said.

Anticipating the impact of Typhoon “Pepeng” (international codename: Parma), the President declared on Oct. 2 the entire country in a state of calamity.

A few days before, the Department of Trade and Industry placed a ceiling on all prices of basic commodities in supermarkets and wet markets to prevent unscrupulous business owners from taking advantage of the shortage of basic commodities in the wake of Storm “Ondoy” (international codename: Ketsana).

Ms Arroyo directed the joint DoE-DoJ task force to monitor the implementation of EO 839 and to file complaints against violators.

Give a little

Justice Secretary Agnes Devanadera said rehabilitation efforts in Luzon could not make headway because of the rising fuel prices.

“You have to respond to the devastation … You don’t have to be an oil company to realize [that] you have to give a little,” Devanadera said.

The joint DoE-DoJ task force had met with oil company executives for reasonable fuel prices and continuous supply over the past two weeks. The oil firms, however, continued to raise prices until the past two days.

Devanadera said the companies had used as basis rising international prices for the fuel increases. “Don’t tell me that when the [world] prices go up, [the prices of] their present stock also go up,” she said.

Deregulation law

She said the price freeze complied with the Oil Deregulation Law. “It’s in Section 14-E,” Devanadera said.

The provision reads: “In times of national emergency, when the public interest so requires, the DoE may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any person or entity engaged in the industry.”

Unioil Petroleum Philippines was the first to comply with the order. On Sunday, it cut prices of diesel by P2 a liter; unleaded gasoline by P1.25 a liter; regular gasoline by 85 centavos a liter; and kerosene by P1.50 a liter.

Chevron and Seaoil Philippines implemented the same cuts effective 12:01 a.m. Tuesday.

“While Chevron will comply with EO 839, this does not prejudice other legal options and remedies for us to explore,” said Chevron spokesperson Toby Nebrida.

Cheap but not available

Other oil companies had yet to announce their respective oil price cuts as of press time.

“Would you consider higher public interest for products to be cheap but not available or for products to be expensive but reflecting the true cost, but available?” Chua asked.

Flying V has declared that it will sell whatever stocks it has and will only import petroleum products again until the EO is lifted. The company normally has an inventory of 15 to 21 days.

Take a loss

Despite the assertions of the oil firms, Energy Secretary Angelo T. Reyes maintained that the directive would be enforced and that all oil companies must comply.

“Compliance with the law and any presidential issuance is mandatory—we will implement this law. And we would like to request the oil companies to take a hit, take a loss at this time when the country faces devastation,” Reyes told oil firm executives at the meeting.

He said the oil firms could take legal action, “but the law must be enforced, the law must be obeyed.”

Legal options

The oil companies said that before the government could impose any fuel price cap, a congressional nod or recommendation was needed.

“We are studying legal options,” Martinez said. “This [EO] is very dangerous … It is not the way our legal experts see as an implementation of the emergency aspect within the Oil Deregulation Law.”

Sen. Manuel Villar Jr. supported Ms Arroyo’s decision to freeze oil prices. “It is expected that the President should assert that,” said Villar, who will run for president in the 2010 elections.

He said it was well within the powers and prerogatives of the Chief Executive to resort to such a measure during an emergency.

Both ways

Golez said the EO could work “both ways,” meaning oil companies would benefit if prices dropped below the Oct. 15 levels. In that case, he said oil firms would still sell their products at a higher rate and enjoy bigger profit.

“This EO has been thought of,” he said. “This can work both ways, but will work for the general welfare of our people.”

Golez said defiant oil companies would “have to face the consequences.” With a report from Michael Lim Ubac