DoE could outline plans for strategic oil reserve by June
THE Department of Energy (DoE) is planning to issue a circular by June outlining plans for the establishment of a strategic oil reserve.
Rino E. Abad, director of DoE’s Oil Industry Management Bureau (OIMB), said that the drop in global oil prices represents an opportunity to stock up on petroleum products.
“Plano po namin in the next month or two, makapag-isyu po tayo ng circular (We plan to issue a circular on the oil stockpile program in the next month or two),” he told BusinessWorld by phone.
“We really have to move forward on this,” he added.
The DoE has been pushing for an oil reserve to guard against oil price volatility and supply disruptions.
State-owned Philippine National Oil Corp. is currently putting together a feasibility study on the strategic reserve. The study will form the basis of the DoE’s planned regulatory regime.
The strategic reserve will also undergo the budgeting process in Congress.
As of April 27, the Philippines had an estimated 3.29 billion liters of petroleum in its inventory, equivalent to 56.7 days’ consumption. Finished petroleum products are good for 27.9 days, and crude oil 28.8 days.
Oil prices have continued to drop due to a glut caused by the decline in demand due to the coronavirus disease 2019 (COVID-19) pandemic.
Mr. Abad said that the decline in oil demand is only temporary and that it may recover, along with prices, by the fourth quarter or early 2021, as major world economies roll out stimulus programs to ensure their economies recover.
Meanwhile, Energy Secretary Alfonso G. Cusi said on ANC Thursday that domestic fuel prices will remain volatile up to the end of the third quarter as demand will not return to pre-quarantine levels.
“I think that the (oil) prices up to the end of the third quarter will be volatile, and we will be seeing lower demand (from) consumers because there will still be restrictions in the mobility of people and somehow it will affect the demand for oil,” he said.
Mr. Cusi said the country is not reaping the benefits of low oil prices “because people are not traveling.” It has also affected retailers because they are not selling fuel.
“They bought some stocks at the high price that are still being sold at a low price. So they are experiencing cash flow problems,” he added.
He has noted around 10% of domestic fuel retailers closed down during the enhanced community quarantine (ECQ).
The oil rout has also affected exploration activity as concession holders evaluate whether exploring is worthwhile with prices so low.
The government could return to formal discussions with Chinese partners for joint exploration in the disputed West Philippine Sea (WPS) as soon as the ECQ is lifted.
“Maybe after the ECQ, we will sit down with our Chinese counterpart to see what is the best way to explore and exploit the resources,” Mr. Cusi said.
The ECQ will be lifted after May 15. — Adam J. Ang
