Explore, Explore, Explore

The looming threat of another round of fuel supply disruption is emerging in the horizon. This is especially true in the case of the Philippines that gets much of its crude oil supply from the Middle East (ME). The rebel drone attacks at Aramco oil field saw the destruction of major oil facilities in Saudi Arabia last Saturday.

Thus, immediately after this news broke out, officials of the Department of Energy (DOE) headed by Secretary Alfonso Cusi had an emergency meeting that very same day. Cusi called government energy agency officials to sit down and assess the possible contingency scenarios.

There is no rush to push the panic button at this time as far as the Philippines is concerned, Cusi assuaged the public when he joined us in our weekly Kapihan sa Manila Bay breakfast forum at Café Adriatico, Malate last Wednesday.

We were joined by Samar Rep. Edgar Mary Sarmento, chairman of the House committee on transportations, who pitched for efficient use and conservation of oil products as important part of ensuring the country’s energy security.

For the meantime, Cusi pointed to existing mechanism under the Tax Reform Acceleration and Inclusion (TRAIN) Law that would allow the government to reduce excise tax on gasoline and other oil products to cushion consumers from the price spiral. He particularly cited the provision of the TRAIN Law that would automatically suspend excise tax on refined oil products if the world price of crude would average $80 per barrel for three consecutive months.

“There is this safety net, in case of extreme situation or emergency, I’m sure the government has the power to do what is necessary,” Cusi pointed out.

Sarmento confirmed this also during the Kapihan sa Manila Bay. Sarmento voted for the approval of the TRAIN Law during the 17th Congress. Now on his second term as a Representative at the 18th Congress, Sarmento particularly pointed to the need to address the so much waste of gasoline and diesel consumption due to traffic gridlocks that paralyze the mobility of transport vehicles. As chairman of the House committee on transportations, Sarmento is shepherding the passage into law of the controversial bill on the proposed Traffic Crisis Act that seeks to grant emergency powers to President Duterte.

Cusi ribbed Sarmento that the Congressman is the “emergency” while the Energy Secretary is the “power” as he is also in charge of the power industry. Speaking of power, Cusi is pleased to note the country’s power supply situation won’t be much affected by the oil crisis since it no longer depends much on bunker fuel to run electricity utilities because more than 50 percent rely on natural gas and renewable energy.  

While Saudi Aramco has restored some of its destroyed oil facilities, the United States (US) – a known ally of Saudi Arabia – has warned Iran for the unprovoked drone attacks to its ME ally. In turn, the government of Iran pointed to Yemen rebels as the enemy behind the Aramco attack to end the Saudi war with the Yemeni people.

Even as war clouds loom in the ME, the DOE Secretary appears cool as a cucumber. Cusi sought to douse concerns on the feared new round of oil supply crunch that would likely disturb again the global oil supply situation. In fact, he welcomed as “good news” the announcement of Saudi energy minister that Aramco has already restored as early as Wednesday at least 50% of the oil production cut in the aftermath of the drone attack. 

Saudi produces 5.7 million barrels per day (bpd) of crude, or more than five percent of the global oil supply.

This pushed global oil prices to surge four-month highs as trading opened, with Brent crude reaching nearly $72 per barrel before settling at $68.06 per barrel on Monday.

Cusi reassured us that our country has enough fuel inventory – crude and finished products good for 30 days; bulk importers for 15 days, and liquefied petroleum gas (LPG) for seven days – as required by existing laws in our country. The more developed countries, like Japan, South Korea and the US, have a minimum stockpile of more than 90 days worth of inventory of crude and finished products.

Cusi conceded the country remains susceptible to the consequent price volatility of gasoline and other refined oil products in the next few weeks. The price impact of the supply disruption of Saudi Aramco’s facilities would definitely be felt by next week, he admitted.

The local oil companies are likely to impose hefty hikes anew in their pump prices.

These include the three major oil players in the country – Petron, Pilipinas Shell and Caltex – and at least ten independent petroleum producers like Phoenix, Total, Unioil etc. But it is only Petron and Shell that have oil refineries. Caltex and the rest merely import gasoline, LPG and other refined petroleum products.

The government no longer fixes the price of gasoline and other petroleum products as mandated by Republic Act 8479, or the Oil Industry Deregulation Law of 1998. Among other things, it abolished the Oil Price Stabilization Fund and paved the way for the government to privatize the Philippine National Oil Co. (PNOC) that was once fully owned by the government.

This left the government’s presence in the supply chain almost nil while competition is supposed to dictate the pricing in the country’s local oil industry. The need for the Philippines to develop its own strategic stockpile reserve is thus most urgent, Cusi stressed.

 Hence, he pointed out, exploration and energy security are being pushed by President Duterte in the search for indigenous resources that could be tapped at the West Philippines Sea, Malampaya in Palawan, the Benham Rise, at the Liguasan Marsh in Cotabato, at the Sulu Sea, and other potential oil and gas presence offshore and inshore sites all around the country.

The DOE, Cusi vowed, is committed to “Explore, Explore, Explore” in its pursuit of energy independence, security, and sustainability through the effective and reasonable development of all indigenous energy resources in the Philippines.