e-Procurement within a deregulated oil environment

Whenever discussions center on the depreciating peso, the volatile political situation in Middle East oil-exporting countries, oil inventory reserves trend from developed countries and compliance with the Clean Air Act, one could not help but focus their thoughts on the next round of oil price hikes. Economic watchers see the commodity as another crucial barometer to monitor producer price trends, especially if it’s significantly used in the production process. Consumers, on the other hand, view these developments as another bitter pill they’re forced to swallow, by tightening their belts further and restricting purchases for other items.

Within a deregulated downstream environment, the common perception is that consumers are king as various choices are made possible with the entry of more players. Yet, various insights claim this does not seem to be the case within the Philippine setting, causing fiscal regulators to consider repealing Republic Act 8479, or the Oil Deregulation Law. The question is, will it be more laudable to revert the industry back to government’s control? Or, are there alternatives to allow consumers to benefit from a deregulated oil environment?

Some claim one of the main criteria that restricts entry of more players other than the Big Three, is the amount of capital new entrants need to invest to set up depots and distribution facilities. Yet with global financing becoming more accessible especially with regards to interest arbitraging, however, venture capitalists need only to be convinced on the medium- and long-term merits before they agree on available investment prospects.

What deserves attention though, is that several industrial and commercial consumers are tied to long-term contracts with the large players, inhibiting them from entering into better agreement terms with emerging players. To resolve this dilemma, large consumers of oil need to consider gradually changing the way they do business to survive the peaks and troughs of a volatile oil environment. The initial step begins when decision-makers drive their overall Team to join an eMarketplace like SourcePilipinas, where they could expand their supplier network and respond more effectively to available process flow alternatives.

One of the companies that joined SourcePilipinas’ roster of active trading partners is Unioil Petroleum Inc., one of the leading independent oil firms. Today, Unioil offers diverse petroleum products and services that effectively fulfills energy requirement of motorists, various commercial and industrial clients, power plants, commercial carriers and other blenders and refiners. SourcePilipinas aided Unioil’s procurement requirements by actively participating in the early stages of network construction as well as contract preparation. Advisory services were given in the form of preparation of bid documents, where more transparent bid evaluation criteria are formed. Since contractors were given equal opportunity to effect their bids online, Unioil is more able to rechannel excess resources to finance other capex-related items.

More than just procurement savings on construction development, SourcePilipinas has aided other emerging oil players’ property insurance and cargo/marine needs, where premium costs are lowered and available options are extended. Through SourcePilipinas’ regional linkages, buyers benefit from wider channels where they can implement alliances to secure cleaner yet cheaper oil products. Other promising oil suppliers benefit from outsourcing the marketing function through Source’s exchange, by tracking on catalogued orders, effectively aiding their supply planning and sales-related functions.

Reversing the deregulation rule mid-way won’t bode well for the country’s reputation to global investors. Companies will have to extract themselves from a boxed mentality, and maximize available alternatives within the e-Commerce platform. Broader alternatives would result in lower prices to consumers, and improve decision processes within the production chain.

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Maritel E. Mallo is senior business development associate of SourcePilipinas.com and COO of 2TradeAsia. For your comments or queries, e-mail her at [email protected].