Department of Energy Presentation re: Oil Pricing, August 2009

8/14/2019 Department of Energy Presentation re: Oil Pricing, August 2009

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Deregulation and Oil Pricing

in the Philippines

Deregulation and Oil Pricing

in the Philippines

Department of Energy

Presentation to the

House Committee on Energy

Department of Energy

Presentation to the

House Committee on Energy

July 29, 2009

July 29, 2009


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CRUDE

AVTURBO8.6 8.7

PREMIUM13.4 17.6

KEROSENE1.6 1.2

DIESEL36.8 40.2

FUEL OIL24.6 16.0

REGULAR6.5 4.1

Other Products

(Asphalts/Solvents/Avgas/NaphthReformate/Condensate)

3.0 0.50

LPG5.5 10.1

177.2 MBCD 276.5 MBCD

FY 2008 Production/ Demand Mix

20072007

SectoralSectoralDemandDemand

SectorSector %%

TransportTransport 6363

ResidentiaResidentiall

88

CommerciCommercialal

55

AgriculturAgriculturalal

33

IndustrialIndustrial 1414

PowerPower 77


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2008 Energy/Power Mix

Self-sufficiency level =

57.9%

Energy Mix

Total Generation = 60,820GWh

Coal

25%

NaturalGas

32%

Ge o

18%

Hydro

16%

Oil

8% Solar & Win

0%

Self Sufficiency Level = 67%

Power Mix


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An Act Deregulating the Downstream OilAn Act Deregulating the Downstream Oil

Industry, and for other PurposesIndustry, and for other Purposes

`to ensure a truly competitive market`to ensure a truly competitive market

under a regime of fair prices,under a regime of fair prices,

adequate and continuous supplyadequate and continuous supply

of environmentally-clean and high qualityof environmentally-clean and high quality

petroleum products`petroleum products`

Republic Act No. 8479


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An Act Deregulating the Downstream OilAn Act Deregulating the Downstream Oil

Industry, and for other PurposesIndustry, and for other Purposes

`to ensure a truly competitive market`to ensure a truly competitive market

under a regime of fair prices,under a regime of fair prices,

adequate and continuous supplyadequate and continuous supply

of environmentally-clean and high qualityof environmentally-clean and high quality

petroleum products`petroleum products`

Republic Act No. 8479


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RA 7638 DOE Law RA 8479 Oil Deregulation Act

RA 8749 Clean Air Act

RA 9367 Biofuels Act

RA 8184 Excise Tax

RA 9337 RVAT

EO 691 Automatic TariffAdjustment

EO 449 Lower Tariff forBioethanol for Fuel

DOE Circ 2006-08-011 Importations of

REGULATORY FRAMEWORKREGULATORY FRAMEWORK


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DOE - OIMB

Monitoring

Fuel quality/quantity (RA 8479 / RA 9367)

refining/marketing process, inventory, price (RA 8479)

Additives Registration (RA 8479 / RA 8749)

Fuel Quality Standard Setting (RA 8749 / RA 9367)

Petroleum Facilities Standard Setting (MOA with BPS)

Regulate as necessary (RA7638)

DOE - EUMB (RA 9367)

Accreditation of Biofuels Manufacturers

Monitoring of Biofuels Manufacture/Marketing

DOE-ERTLSconducts testing of samples,

DOE-Legalprocesses violations

DOE ROLESDOE ROLES


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DOWNSTREAM OIL SECTOR


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2008 MARKET SHARE

Total oil LPG


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LPG Market Share - FY 2008

May 27,

Total Country

11,509 MB

Petron

37.7%

Shell

19.9

Total

9.1%

Liquigaz

24.2%

Pryce Gas

3.4%

Petronas5.8%

Liquiga

28%

Total

25.6

Petron24%

Shell

22.4

S. Luzon

1,361 MB

Total

13%Petronas

1.1%

Liquigaz

20.6%

Shell

25.9%

Petron

39.4%

NCR

3,850MB

Visayas

1,296 MB

Total

0.1%

Shell

24.4%

Petron

34.9%

Pryce

15%

Petronas

25.6%

N. Luzon

4,036 MB

Total

4.86%

Shell

12.67%

Liquigaz

39.90%

Petron

41.80%

Pryce0.76%

Total

0.2%

Shell

16.5%

Petron

36.8%

16.8

Petrona

29.7%

Mindanao


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0

50

100

150

200

250

300

350

400

450

500

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Refining Cap. Demand Production Imports Exports

YEAR 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

% Ref. Utilization 72.0 85.6 81.0 82.8 84.6 89.5 91.5 81.0 76.7 72.5 70.7 61.5 70.0 68.8 74.2 72.9 73.7 64.6

Petroleum Supply vs. DemandPetroleum Supply vs. Demand


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Regional Distribution Of OilRegional Distribution Of OilDownstream FacilitiesDownstream Facilities

REGION I456MB

6 Depots

REGION III4,676MB

16 Depots2 I/E Terminal

(Subic& Clark)

N C R2,073MB

22 Depots

REGION IV-A2,557 MB; 8Depots

2I/E Terminal(SGEI & CALTEX)

REGION IV-B145 MB; 11 Depots

REGION VI

621 MB15 Depots

REGION IX211 MB

5 Depots

A R M M

2 MB1 Depot

REGION XI445MB

7 Depots

REGION II101 MB

5 Depots

C A R0.49MB1 Depot (non operational)

REGION V138MB5 Depots

REGION VIII255 MB

8 Depots

REGION VII707 MB15 Depots

REGION X

644 MB12 Depots

REGION XII260 MB

6 Depots

L

u

zon

V i s a y a s

M i n d a n a o

REGION XIII (CARAGA)

86 MB3 Depots

6-30-2008

No. CAPACITIES

DEPOTS (MB)

Majors 75 5,652

Others 75 2,842

TOTAL DEPOTS 150 8,493

IMPORT/EXPORT TERMINALS

Subic - Olongapo 1 2,445

Clark - Pampanga 1 600

SGEI - Tabangao, Batangas 1 290

Caltex - San Pascual, Batangas 1 1,548TOTAL TERMINALS 4 4,883

REFINERY (Crudes & Products)

Petron- Limay, Bataan 9,382

Shell - Tabangao, Batangas 5,380

TOTAL REFINERY 14,762

TOTAL 28,139


13/58


14/58

Liberalized entry of new players (145 brands)Liberalized entry of new players (145 brands) Refiners - 2Refiners - 2

Produce 30% of local LPG demand; 60% of total productsProduce 30% of local LPG demand; 60% of total products

58% market share (LPG);58% market share (LPG);

Importers (including refiners) - 10Importers (including refiners) - 10

6 for LPG, 2 operating only in VisMin6 for LPG, 2 operating only in VisMin

Imports 70% of local LPG demand ; 40% of total productsImports 70% of local LPG demand ; 40% of total products

LPG Refillers - 8LPG Refillers - 8

6 importers have 49 refilling plants6 importers have 49 refilling plants

8282 independent refillers have 136 plantsindependent refillers have 136 plants 5757 independent marketers avail of facilities of refillersindependent marketers avail of facilities of refillers

LPG Dealers/retail outlets 1,300/10,000LPG Dealers/retail outlets 1,300/10,000

Auto-LPG stations 178 public; 66 garage-basedAuto-LPG stations 178 public; 66 garage-based

Gasoline stations 4,000Gasoline stations 4,000

800800 new playersnew players

REGULATORY FRAMEWORKDeregulated Oil Industry


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Oil Pricing


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0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

M-84

J-85

N-85

S-86

J-87

M-88

M-89

J-90

N-90

S-91

J-92

M-93

M-94

J-95

N-95

S-96

J-97

M-98

M-99

J-00

N-00

S-01

J-02

M-03

M-04

J-05

N-05

S-06

J-07

M-08

M-09 0

5

10

15

20

25

30

35

40

45

50

55

60

Dubai US$/bbl Dubai P/li Forex P/1$

DUBAI CRUDE PRICES/FOREX

March 1984 MTD July 2009$/bbl P/$


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DUBAI vs. BRENT vs. WTI

January 2005 MTD July 2009

$/bbl

140

150


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25

35

45

55

65

75

85

95

105

115

125

135

145

155

165

175

185

195

3-Dec

24-Dec

14-Jan

4-Feb

25-Feb

17-Mar

7-Apr

28-Apr

19-May

9-Jun

30-Jun

21-Jul

11-Aug

1-Sep

22-Sep

13-Oct

3-Nov

24-Nov

15-Dec

5-Jan

26-Jan

16-Feb

9-Mar

30-Mar

20-Apr

11-May

1-Jun

22-Jun

13-Jul

$/bbl

INTERNATIONAL PRICES

December 2007 MTD July 2009


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SOURCES OF SUPPLY


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DAILY INTERNATIONAL PRICE vs


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DAILY INTERNATIONAL PRICE vs.COMMON PUMP PRICE

In P/li, Jan MTD Jul 2009

4 0

4 5

International prices shown as FOBInternational prices shown as

Total-Paid Landed Cost (TPLC)

40

45


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P/li

INTERNATIONAL vs. DOMESTIC PRICESJanuary 2009 MTD July 2009

40

45

International prices shown as

Total-Paid Landed Cost (TPLC)


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DUBAI vs. MOPS (Tax-paid Landed

Cost)vs. MANILA Pump PriceP/li

4 0

4 5

4 0

4 5

Unleaded

Diesel


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PREVAILING RETAIL PRICES in

METRO MANILAAs of July 28, 2009*

P R O D U C

U N L E A D E D

P R E M IU M U N L E A


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METRO MANILA PRICING

P/li

5 0

Gasoline

5 0

Diesel


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P/kg

DUBAI vs. CP LPG vs. MM LPG WPPJanuary 2009 MTD July 2009

45

50


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INTERNATIONAL vs. DOMESTIC PRICES


28/58


29/58

Top

Producers mil bbl/d

Net

Exporters mil bbl/dSaudi Arabia 10.25 Saudi Arabia 8.04

Russia 9.87 Russia 7.05

United States 8.46 UAE 2.51

Iran 4.03 Norway 2.34

China 3.91 Iran 2.33

Mexico 3.50 Kuwait 2.29

Canada 3.42 Nigeria 2.08

UAE 2.95 Venezuela 1.96

Venezuela 2.67 Algeria 1.91

Kuwait 2.62 Angola 1.71

Norway 2.57 Libya 1.58

Nigeria 2.35 Iraq 1.50

Brazil 2.28 Mexico 1.38

Algeria 2.17 Kazakhstan 1.21

Iraq 2.10 Canada 1.06OPEC =12 countries incl.Angola and Ecuador; Indonesia no longer member

Source: EIA 2007 data

OPEC Cartel vs WorldSupply/Demand

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9

D E M A N D

U S * 2 0 . 8 0 2 0 . 6 9 2 0 . 6 8 1 9 . 5 1 1 8 . 9

C h i n a 6 . 7 0 7 . 1 4 7 . 5 4 7 . 8 6 7 . 8

In d ia 2 . 5 3 2 . 6 0 2 . 9 5 3 . 0 7 3 . 1

P h i l s . 0 . 3 0 0 . 2 8 0 . 2 9 0 . 2 7 0 . 2

O t h e r s 5 3 . 5 7 5 4 . 3 9 5 4 . 5 8 5 5 . 0 6 5 3 . 2

T O T A L W O R L D D E M A N D8 3 . 9 0 8 5 . 1 0 8 6 . 0 4 8 5 . 7 7 8 3 . 4

S U P P L Y

O P E C * * 3 0 . 3 1 2 9 . 6 4 3 1 . 0 4 3 2 . 1 5 2 8 . 2

N o n - O P E C 4 9 . 2 0 4 9 . 7 0 5 0 . 1 5 4 9 . 5 4 5 0 . 0

O P E C N G L s

c o n v e n t i o n a l s 4 . 5 0 4 . 6 0 4 . 7 7 4 . 9 6 5 . 5

T O T A L S U P P L Y 8 4 . 0 1 8 3 . 9 4 8 5 . 9 6 8 6 . 6 5 8 3 . 4

N o t e : 1 ) B a l a n c e o f T o t a l S u p p ly v s T o t a l D e m a n d : s t o c k c h a n g

2 ) T o t a l s u p p ly a n d d e m a n d t a k e n f r o m IE A f o r e c a s t3 ) O P E C m e m b e r s n o w e x c l u d e s In d o n e s i a .

4 ) IE A q u o t e d 2 8 . 2 m il b / d a s " c a l l" f o r O P E C f o r 2 0 0 9 , .

S o u r c e : IE A 's A p r i l ' 0 9 O i l M a r k e t R e p o r t

* E I A

* *P la t t s s u r v e y

m i ll io n b / d


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Independent Review CommitteeIndependent Review Committee

Third Party Reviews


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1. Mr. Carlos R. Alindada Private Sector

- retired Chairman of SGC & retired Commissioner of ERC.

- served as Chair of the IRC

2. Mr. Cedric R. Bagtas Labor Sector

- Deputy-General Secretary of the Trade Union Congress of the Phils. (TUCP)

3. Ms. Merceditas A. Garcia Oil Industry (Dealers Association)- President of the Federation of Petroleum Dealers of the Phils.

4. Mr. Jose P. Leviste, Jr. - Business Sector

- Chairman of the Philippine Business Leaders Forum, Inc.

- original Executive Director of the Petroleum Board

5. Mr. Alberto H. Suansing Consumer/Transport Org.

- Secretary General of the Confederation of Land Transport Organizations of the Phils.- undertaking several advisory functions for the Secretary of DOTC

6. Dr. Peter Lee U Academe

- Dean, School of Economics, University of Asia and the Pacific

- had prepared several papers & studies on Oil Deregulation

Composition of IRC

INDEPENDENT REVIEW COMMITTEE


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Independent Oil Deregulation Law

Review Committee

Composition:- Mr. Carlos R. Alindada (designated Chairman )

- Ms. Merceditas A. Garcia - Dean Peter Lee U

- Mr. Jose P. Leviste, Jr. - Mr. Alberto H. Suansing

- Mr. Cedric R. Bagtas

Mandate:To review/assess the implementation of RA 8479

Time Frame: 90 Days (until June 2005)

Issues to Focus:

- Policy Under RA 8479 - Pricing Behavior - Product Margins - Price Fixing/Cartelization

- Clean Air Act - Enforcement of Standards-Oil Security

Activities: 10 Meetings conducted starting March 17, 2005


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ON PRICES

The main cause of oil price increases was the effect of major peso devaluationsand increases in the international price of oil especially since we import practicallyall our oil product requirements.

Subsidy is not a viable solution because it will cost government excessive amountsof money.

There is no evidence of price cartels. When products are interchangeable, whenmarket share is the name of the game, and competition is in full swing, we shouldnot be surprised, but rather expect, that oil companies prices will seem to rise and

fall at the same time. However, this does not mean that cartels exist.

ON COMPETITION

Deregulation has increased competition in the industry. There are both positive and negative effects on competition. The

effect on lowering prices outweighs other effects.

IN SUMMARY

Do not change the Policy of the State.

IRC - FINDINGS/CONCLUSION

SGV UA&P I d d t St d


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Findings/Conclusion

Per the opinion of the author, the oil prices do not seem to have been unreasonably high for theperiod covered by the data in the study.

Price data from Jan. 2005 to Jan 2008 suggests that local pump prices have not gone up as fast asthe price of crude abroad or the MOPS prices for diesel and unleaded gasoline during the period.

Philippine pump prices simply tracked MOPS prices; a comparison of the share of the oil companytake in 2007 with that in 1998 shows the same trend of a declining share of the pump price thatgoes to the oil company.

SGV UA&P Independent Study

on Oil Prices


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-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

Jan-87 Jun

No

v

Ap

r

Se

p

Fe

b

Jul

De

c

May

Oct Ma

r

Au

g

J9

2

Jun

No

v

Ap

r

Se

p

Fe

b

Jul

De

c

May Oc

t

Ma

r

Au

g

J97

Jun

No

v

Ap

r

Sep

Billion

Pes

os

P5Bn

Petroleum

Price

Standby

Fund

(RA 6952)

P3Bn equity

infusion to NPC

(RA 7639)

P5BnRemitted by

PNOC

P4Bn

Remitted by

PNOC

APM

implemented

mid-Aug 1996

Oil Price Stabilization Fund

HISTORICAL NET INCOME/(LOSS)


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HISTORICAL NET INCOME/(LOSS)

(In Percentage)

2004 2005 2006 2007 2008

P E TR O N 2.78 3 .16 2.84 3 .04 (1.46

S HE LL 2.25 3 .87 2.63 3 .90 1.20

CALTEX (2.6 1) (0.52 ) 3.65 3 .90 (1.51

T OT A L (2.37) 0.64 (1.01) 1.28 (2.02

E A S T E RN (0.56) 0.25 0.55 0 .49 0.19

S E AO IL 0.31 0 .23 0.27 0 .51 4.08LIQ UIGAZ 1.06 1 .02 0.62 1 .01 0.13

P R Y C E (6 .4 9) (1 .1 5) (0 .5 8) 23.46 (12.58

P TT (1 4.5 2) (1 .5 9) 0.71 0 .01 1.39

F o rm u l a : N e t I n c o m e /S a l e s * 1 0 0


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High Oil Prices A GlobalPhenomenon

A.On going:

1. Incremental local oil prices increases P0.50-2.00/li per

week2. Diesel discounts in PUJ jeepney lanes

3. Automatic tariff cut (EO 691) - P1.50/l cut on price effectiveJune 2008

4. Enhanced enforcement

PTF-SEFEELS: court cases/closure/penalties PAKTAF: anti kotong/kolorom drive now giving public transport drivers

additional P4,000/mo. take home

B. Long term:

5. Energy conservation & efficiency

MITIGATING MEASURES


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` Bio- fuels

Coco-diesel Alcogas / diesel

Natural Gas LPG

Water-based Wind Solar

Hydrogen Electric

Fuel CellsFuel Blends Hybrids Dual

Alternative Fuels and BlendsAlternative Fuels and Blends


39/58

BIOFUELSBIOFUELS

Mandate Biofuels ActMandate Biofuels Act


40/58

Mandate Biofuels ActMandate Biofuels Act

Strategy for Feedstocks

Status of BiodieselStatus of Biodiesel


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Status of BiodieselImplementationStatus of BiodieselImplementation

Country Mixing Rate

(Mandatory)

Main

Feedstocks

Strategy/ Goal Standard

Philippines

B1 (2004)for diesel-fedvehicles ofgovernment , incl

owned andcontrolled corp.

Coconut MemorandumCircular #55(MC55)

PNS/DOE QS002:2003(B100)

(Biodiesel =

CME :Cocomethylester)

B1 (2007)for all diesels

Coconut

(Researchon-going for

Jatropha andotherfeedstocks

Biofuels Law2006

National

Biofuels Board

MC55

PNS/DOE QS002:2007(B100)

PNS/DOE QS004:2007 (B1)

B2 (2009)

for all diesels

Coconut

(Research

Biofuels Law2006

PNS/DOE QS002:2007

Status of E-GasolineStatus of E-Gasoline


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Status of E GasolineImplementationStatus of E GasolineImplementation

Mixing Rate MainFeedstocks

Strategy/Goal

Standard

E10 voluntaryintroduction bycompanies inselected stations(2005)

Bioethanol(from sugarcane,imported

EO 449 1%tariff (insteadof 10%) withDOEcertification foruse in biofuel

program

PNS/DOE QS 00:200(bioethanol = anhydrousor E100)

PNS/DOE QS 00:200 (fuelbioethanol = denaturedbioethanol)

PNS/DOE QS 00:200 (E10)

E10 voluntaryintroduction byall companies inselected stations(2009) to complywith 5%mandatorysubstitution ofgasoline

Sugarcane alcohol anhydrous

(Research on-going forcassava, sweetsorghum andotherfeedstocks)

Biofuels Law2006

National

Biofuels Board

PNS/DOE QS 00:200 (E10)

E10 mandatory sugarcane Biofuels Law PNS/DOE QS 00:200 (E10)


43/58

Concerns/Next StepsConcerns/Next Steps

CONCERNS NEXT STEPS

Quality assurance capabilities ofQuality assurance capabilities ofthe biofuel producersthe biofuel producers

Inter-laboratory correlation Accreditation of 3rd party laboratory Acquisition of common equipment Discussion on markers (product ID)

Qualified storage and transportQualified storage and transportfacilitiesfacilities

Preparation of standards andregulations

Compatibility of the higher biofuelCompatibility of the higher biofuelblends on the existing vehicleblends on the existing vehiclefleet as well as those underfleet as well as those underwarranty etc.warranty etc.

Conduct studies Prepare guidelines

Higher price of biofuel comparedHigher price of biofuel comparedwith pure gasoline/dieselwith pure gasoline/diesel

RD&E of feedstocks, capabilities andmarkets

Closer coordination withCloser coordination with

stakeholdersstakeholders

Intensified information,Intensified information,

education and communicationeducation and communication

StandardizationStandardization


44/58

Fuel Quality Conventional

Alternative fuels &blends

Facilities Gasoline stations LPG vehicles, parts /

conversion kits

Terminals Control equipment

(correlation)

Codes of Practice LPG Vehicle

Conversion Retail Operation

Bulk Storage,Handling &Distribution

StandardizationStandardizationThrust Towards Harmonization

Benefits of harmonized biofuels quality standard

Align readily local fuel standards to the WWFC vis--vis local emission regulations Reconcile general biodiesel standard and its blends with emerging vehicle

technologies Facilitate trade across boarders thus ensuring supply availability/ better economy Better access to improvements in technology, leading to improvements in air quality

Benefits of ERIA BDF Standardization for East Asia Project Consideration of other biodiesel feedstocks, e.g. coconut, by WWFC, ASTM and EN

Review of parameters, limits and methods in the international and local standards


45/58

IN SUMMARYIN SUMMARY


46/58

Non-pricing factorsNon-pricing factors

REGULATED DEREGULATED

Entry Reqts. Prior License Prior Notice

Import/ExportReqts.

Prior Permit Prior Notice

Players 6 to 3 Over 800

Investment Minimal until deregulationpolicy declared

P34B to date

Quality

Product

Facilities

Service

Meets minimum standard



More product grades withperformance additives

New image; Conveniencestores; Restrooms;

Much improved

REGULATORY FRAMEWORK


47/58

Price DecontrolPrice Decontrol

DOE monitors international and local pricesDOE monitors international and local prices

Daily MOPS indications of Dubai, gasoline, diesel, keroseneDaily MOPS indications of Dubai, gasoline, diesel, kerosene

Monthly CP (Contract Price of Saudi Aramco) of LPGMonthly CP (Contract Price of Saudi Aramco) of LPG

Retail prices, esp. MMRetail prices, esp. MM

Oil companies set local pricesOil companies set local prices

For gasoline, diesel, etc:For gasoline, diesel, etc:

This year - Shell led weekly reflection of MOPS in local pricesThis year - Shell led weekly reflection of MOPS in local prices

Prior years oil cos. implemented moderated price adjustmentsPrior years oil cos. implemented moderated price adjustments

For LPG, the movements in the CP is quickly reflected in the domestic market,For LPG, the movements in the CP is quickly reflected in the domestic market,

i.e., within the month of effectivityi.e., within the month of effectivity

Prices in cylinders are in P/kg; auto-LPG stations are in P/liPrices in cylinders are in P/kg; auto-LPG stations are in P/li

Independent refillers exercise freedom of choiceIndependent refillers exercise freedom of choice

Shop around for lowest priceShop around for lowest price

Few independent refillers enter into term supply contractsFew independent refillers enter into term supply contracts

Some inde endent refillers enter into alliance with bulk su liersSome inde endent refillers enter into alliance with bulk su liers

REGULATORY FRAMEWORKDeregulated Oil Industry


48/58

CIF Cost of Crude/Petroleum Products

+ Import duty

+ Specific tax

+ Port chargers and other imposts

+ VAT

+ Refining Cost (for crude)

+ Storage/Handling/Marketing Costs+ Oil Company's Profit

Wholesale Posted Price

Direct Oil Company Take

+ Hauling Charge

+ Dealer's Mark-Up

+ VAT

+ Transhipment Cost

+ ( Profit Margin + VAT for local sale)

Pump Price

Oil Pricing - Components

Oil P i i


49/58

Basic considerations

1. Basis

2. Reference

3. Methodology

4. Reckoning

Oil Pricing


50/58

Pricing factorsPricing factors


51/58

POLICY : ENSURE STABLE SUPPLY OF ENERGY

GOALS:

To ensure oil supply security sufficient, stable, accessible

& quality

To conduct technical, economic and social assessment and

studies to ensure continuous and stable supply of oil.

POLICY : RESPONDING TO HIGH OIL PRICES

GOALS:

To ensure oil prices reasonable

To mitigate impact of high oil prices on consumers

To minimize economic leakage on the oil and the public

transport sectors

To promote efficiency and safety in supply and distribution

chain

POLICIESPOLICIES


52/58

Cooperation with other agencies for more intensive monitoring (supply, price, quality, quantity) and enforcement

DTI: Supply and price monitoring, esp. outside MM, Cebu and Davao

PTF-SEFEELS: Continuous inspections for consumer safety and protection (underfilling, illegal refilling, illegal

trading)

NB: Surveillance for hoarding

More active DOE-DOJ TF

assisting complainants of high LPG prices (Feb 3-5)

to pursue cases filed by DOE and the LPG industry

advised LPG companies to petition TRO and/or writ of preliminary mandatory or prohibitory injunction against i llegal traders

(over 150 cases pending)

DOE to issue Circulars to improve safe and fair trade practices

DOE to push for passage of LPG Bill

DOE / Government ActionsDOE / Government Actions


53/58

Oil Deregulation

a work in progress

Oil Deregulation

a work in progress


54/58

Thank you!Thank you!

Oil P i St bili ti F d


55/58

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Feb

Ju

l

Dec

Ma

y

Oct

M

ar

Aug

J92

Ju

n

Nov

Apr

Sep

Feb

Ju

l

Dec

Ma

y

O

ct

M

ar

Aug

J9

7

Ju

n

Nov

Apr

Se

p

Billion

Pes

os

P5BnPetroleum

Price

Standby

Fund

(RA 6952)

P3Bn equity

infusion to NPC

(RA 7639)

P5Bn

Remitted by

PNOC

P4Bn

Remitted by

PNOC

APM

implemented

mid-Aug 1996

Oil Price Stabilization Fund

HOW DID NEDA ARRIVE AT


56/58

HOW DID NEDA ARRIVE AT

THEIR FIGURES

Straight-line Interpolation using DCO

NEDAs gas estimates involve the following:

1)Converting dollar price of DCO to peso

2)Identifying appropriate dates/periods for comparison

3)A straight-line interpolation using DCO prices and averagepump prices of two reference periods

4)Adjusting interpolated pump price to current pump pricing

DOEs RESPONSE TO


57/58

DOE s RESPONSE TO

NEDAs COMPUTATION

It is not reasonable to compare the international prices in previousperiods with that of the current and then relate it to domestic prices

since the economic conditions during the said periods are not

comparable.

In 2005, the oil companies were still implementing the small andstaggered adjustments, as requested from them by the DOE in

2004, hence, the domestic price during that time might not be the

true reflection of international prices.

It is more appropriate to use the Mean of Platts Singapore (MOPS)as basis of the prices, since around 50% of petroleum products

sold domestically is imported as finished products and all industry

players are importing finished products, including refiners Petron

and Shell.

DOEs RESPONSE TO


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DOE s RESPONSE TO

NEDAs COMPUTATION

The use of the COMMON PRICE, the price most commonly found

in the market today, which is below the suggested retail prices

submitted by the oil companies to DOE.

The common price is also below the price computed by the DOE,which was based on the last ERB price build-up plus the

adjustments implemented by the oil companies since deregulation.

The common price was observed starting February 2009 when theprice war in Metro Manila started. The common price is lower by

almost P3.50/liter for gasoline almost P4.50/liter for diesel.

Documents

Department of Energy Presentation re: Oil Pricing, August 2009