Rough Cuts | Too late a plan, but may be…

MIDDLE of last week reports emanating from the national capital said that Malacanang was mulling the idea of the Philippines importing oil and related products from nations that are not members of the Organization of Oil Exporting Countries or OPEC.Really? Malacanang is still mulling that particular idea which by now could already be “Jurassic”?

And why are we saying that the idea being mulled already belongs to the era long past? It is because some of the existing players in the oil industry in the Philippines have long been importing their oil products from countries outside of OPEC. To mention at least two of these non-OPEC member countries being sourced by some of the industry players are Malaysia and China.

Some years back Malaysia was prominently mentioned as the biggest source of oil smuggled into the Philippines through the country’s southern backdoor. After that controversy was “settled” these new oil industry players now shifted to China as their main source of processed oil products. But this time the entry of the commodity into the country is already done on legitimate procedures.

Now what does the report on Malacanang mulling importation of oil from non-OPEC member countries make out of the Palace tenant - or the administration of President Rodrigo Duterte? It actually betrays the Palace’s failure to monitor what is happening in the oil industry. It also indicates the level of performance of the different government agencies tasked to oversee the implementation of policies regarding the country’s oil industry.

Two of these agencies primarily involved in insuring that the country’s oil industry operates in accordance with applicable government policies are the Department of Energy and the Department of Finance through its Bureau of Customs.

In all probability some people of these agencies are not doing their job of monitoring the conduct of the oil industry players. Or, if its officials are doing their responsibility they are blindsiding Malacanang or perhaps even the President, of relevant information resulting to his or the Palace’s issuing erroneous statements.

Yes, it is possible that their monitoring reports are wanting in completeness. Or, they only submit portions of their reports that they think would please the Palace and the President. Have they submitted  honest-to-goodness reports based on the actual industry situation, Malacanang would not have announced that it is mulling the idea of buying oil from countries that are outside the OPEC. Imagine disclosing such plan when in reality some industry players have already been buying from such countries as Malaysia and China the price per barrel of oil products reportedly much cheaper than the OPEC price!

But are there really oil companies sourcing their commodity from non-OPEC members? Yes, of course. And we can be that positive of our answer without fear of being rebuffed.

Remember, sometime early in March this year, we devoted an entire column on information from a very knowledgeable source that an industry player unloaded oil from China into the giant tanks in its depots in Misamis Oriental and Batangas? The importation was so huge the oil products were loaded in 15 chartered ocean-going tankers.

Yes, that was one single huge volume of oil importation from a non-OPEC member country that took some two weeks to unload. And each day the ocean-going tanker vessels lay anchor the oil company importer paid a hefty UD$15,000 for each boat.The vessels operated by an EU-based shipping giant have an average load capacity of 75,000 freight tons of oil.

And by the way China, despite its huge oil production, has never been a member of OPEC which was organized on September 1960 yet by five founding members namely Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. It later expanded to 12 reaching to as many as 14 countries. Today OPEC has 12 members left after Indonesia and Equatorial Guinea suspended their membership in 2016 and in 2017, respectively. Malaysia, Brunei, China and Russia, all known big producers of oil in the world, have never been members of OPEC.

So, even if the government’s plan of having our oil industry players import their merchandise from any of these four countries is already late for the day, may be, if only to arrest the surging prices of oil products, let that move be implemented fast. That is, if there are no legal impediments. And since some of the players are already doing what the Palace wants done, the best that the government can do is push to the limit the agencies concerned to monitor the actual price of oil in those non-OPEC member countries so that when the product is landed in the Philippines, fair retail pricing can be assured.

By conducting strict monitoring of import prices of oil products from the non-OPEC member sources the Department of Energy and the Department of Finance will have a good chance of knowing exactly how much is the movement, whether upward or downward, of the price of oil in the world market.

For is it not  that this supposed movement in the global prices of oil the usual scapegoat of the  industry’s players to immediately raise the prices of their products?

Amidst all these efforts to arrest the skyrocketing of fuel prices however, the question that must be asked – and answered is:  Will the oil companies that will be sourcing their imports from non-OPEC member countries bring down their retail prices to the level expected assuming they got it at lower cost compared to oil imported from OPEC member nations?

We believe they would not. After all, the oil firms in the Philippines are themselves like a micro OPEC.

They are informally organized and yet they collectively decide among themselves how they should price their products and how much. Dispute this? Just drop by a few retail gas stations and take note of the prices of fuel products. What you will see will tell you we are right in our assertion.

It is on this aspect that government should revisit the relevance of regulating the oil industry in the country.

 

Posted in Opinion