DOE reiterates plan to build strategic oil reserve infra to arrest price hikes

The Department of Energy (DOE) on Wednesday reiterated its plan to establish the country’s strategic petroleum inventory aimed at cushioning the impact of price hikes resulting from global oil supply disruptions.

At the virtual Kapihan sa Manila Bay forum, Energy Secretary Alfonso Cusi said the DOE tapped state-run Philippine National Oil Company to conduct a feasibility for its proposal to build a government-owned strategic petroleum reserve infrastructure.

“Patapos na kami sa paga-aral na ‘yan,” Cusi said.

(We are almost done with the study.)

“Kailangan natin magkaroon ng strategic storage [facility] kung saan natin ilalagay ang supply, and then magkakaroon po tayo ng system how are we going to dispose these,” the Energy chief said.

(We need to have a strategic storage facility where we can put the supply, and then create a system of how we are going to dispose of these.)

Cusi said that with the government-owned storage facility the “government can bring in additional inventory and help arrest the price.”

Prices of petroleum products have been consistently going up since the year started due to supply disruptions as well the ongoing tensions between Ukraine and Russia.

With the strategic petroleum reserve plan, Cusi clarified that the government is not intending to compete with the private sector but only to participate in the supply chain.

The Energy chief said the DOE is looking to put the oil reserve facilities in strategic locations across Luzon, the Visayas, and Mindanao.

Cusi also reiterated the DOE’s position to amend the Oil Deregulation law to give the government the power to intervene when there is a spike and prolonged increase in prices of oil products, include of a minimum inventory requirement in the law as well as include a provision to unbundle the oil prices, which is seen to result in greater market transparency by establishing the trends in the prices of oil and finished petroleum products.

Earlier, the Palace called on Congress to review the Oil Deregulation law, formally known as the Downstream Industry Deregulation Act, to include the said provisions amid the weekly increases in oil prices and the ongoing situation in Ukraine that is expected to have an economic impact on the Philippines. 

On the suspension of excise tax on fuel products, DOE-Oil Industry Management Bureau Director Rino Abad said amending the law, particularly the Oil Deregulation law, is needed since the Tax Reform for Acceleration and Inclusion (TRAIN) law did not provide for an executive power to do such.

The TRAIN law increased excise tax on fuel in three tranches from 2018 to 2020, bringing the total duties to P10 per liter for gasoline, P6 per liter for diesel, and P5 per liter for kerosene at present.

Similarly, the TRAIN law has a provision of suspending the scheduled increase in the excise tax when the average Dubai crude oil for three months prior to the scheduled increase reaches $80 per barrel.

This provision, however, has already lapsed following the effectivity of the last tranche of excise tax increase in 2020.

With this, the DOE has been seeking to amend the Oil Deregulation law since October 2021. — RSJ, GMA News