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Palace to scrap oil price freeze order

abs-cbnNEWS.com | 11/12/2009 5:28 PM

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MANILA - Giving into the clamor of the business community, Malacañang announced on Thursday it would lift the cap on oil prices in Luzon.

Justice Secretary Agnes Devanadera confirmed to ABS-CBN News that Malacañang is set to scrap the controversial Executive Order 839, which mandated oil companies to bring down fuel prices to the October 15 level in the aftermath of the recent typhoons.

But she denied that Malacañang was pressured by threats of an oil supply shortage.

"This EO is something that is temporary in nature and it’s not expected to remain for long. And as we can see the weather has improved for several days already," said Devanadera in a phone interview.

She said Executive Secretary Eduardo Ermita will release an order repealing the oil price freeze.

According to her, oil companies resolved to instead provide discounts in areas severely affected by the typhoons.

"[The discounts are] P2 per liter diesel, P1.25 per liter for gasoline P 1.50 for kerosene,” said Glenn Yu, president of independent oil player SEAOIL Philippines.

Meanwhile, Trade and Industry Secretary Peter Favila also confirmed that price ceilings on prime and basic commodities like noodles and canned goods will be lifted as well.

He warned, however, that consumers may see an uptick in prices of these products as some retailers seek to recover losses from the price ceilings.

Favila threatened to "recommend the reimposition of price control" if sellers start overpricing.

"If anyone would be profiteering or would be taking advantage, I will not hesitate to recommend the reimposition of price control because the state of calamity will stay,” said Favila.

Favila then appealed to businessmen not to increase prices in areas that are still severely affected by the devastation of the 3 successive weather disturbances which brought floods, landslides and damage to agriculture and infrastructure in the large part of Luzon including Metro Manila.

Supply shortage

Big foreign and local business groups have been demanding for the termination of President Arroyo’s EO 839, saying the directive would adversely affect the country’s oil supply and possibly create a black market.

On Wednesday, the Asian Institute of Management Policy Center warned that investors may pull out of the Philippines if the government does not lift the price ceiling on oil by the end of this week.

It added that the repercussions of the EO—including supply constraints, the possible spike in oil prices once the order is lifted, and loss in revenues from taxes collected on oil—would be "too devastating" for Filipinos.

Some gasoline stations in the provinces have started rationing to customers due to a supply shortage allegedly brought about by the price freeze. Other stations have been complaining of low fuel inventories and untimely deliveries.

Zenaida Monsada, head of the oil industry management bureau at the Department of Energy, earlier reported that the country's inventory of petroleum products has already dropped to 8 to 13 days' consumption from the normal 21 days since the government ordered oil firms to cap pump prices.

Monsada noted that some oil companies have halted imports, resulting in dwindling supply at many fuel stations.

EO not yet lifted

In a phone interview with ANC's Top Story, Press Secretary Remonde denied that Malacañang has already made a decision to lift EO 839.

"I understand that we have already submitted recommendations but the President is still studying and reviewing the recommendations. She has not yet signed any order lifting EO 839," Remonde said.

Socio-economic Planning Secretary Augusto Santos previously said that the President sought the country's inter-agency National Disaster Coordinating Council's (NDCC) recommendation in a recent cabinet meeting on whether Luzon's calamity status should be removed, so they could, in turn, decide if the price ceiling on basic commodities should stay.

"Since the executive order was implemented because there was a state of calamity...it was agreed that the NDCC will decide if we are still in a state of calamity," Santos said.

In a consultation meeting with government officials early this week, oil companies came up with a proposal to just pinpoint severely affected areas in Luzon where a price ceiling would be implemented. Another proposal was to provide "a package of relief or discounts" in typhoon-stricken areas. With reports from Alvin Elchico, RG Cruz and Michelle Orosa, ABS-CBN News