Oil price control to result in supply cut, BSP warns

Imposing oil price controls would result in reduced supplies, a Philippine central bank official warned on Friday, one day after the government released rules covering the scheme. Introducing price caps – whether for petroleum products, rice, or any other commodity or service – may lead to rationing, Bangko Sentral ng Pilipinas (BSP) deputy governor Diwa C. Guinigundo said. “I think we need to be careful in this kind of schemes," Guinigundo said, referring to Executive Order 839. Under the scheme – rules for which were released on Thursday – oil costs in Luzon will be frozen at October 15 levels for an indefinite period in Luzon while the island remain in a state of emergency. The order has prompted oil companies to warn of a shortage since they may be forced to sell their products at a loss if global fuel costs rise. The same presidential edict has also been widely opposed by business groups, including the Philippine Chamber for Commerce and Industry (PCCI), the country’s largest business organization. Although the oil price freeze may control inflation in the short term, it may be detrimental for the long haul, he said. “In the next few months, when supply gets affected in the process prices will surge and will break out in the future," Guinigundo said. Earlier, Petron Corp., the Philippines’ largest oil company, said it may lose up to P1.5 billion for the last three months of the year since the executive order may force it to sell at a loss. - GMANews.TV