MANILA, Philippines—Despite the oil industry’s threats of a supply shortage, more companies are following a Malacañang directive to bring down fuel prices.

Effective Wednesday, Pilipinas Shell Petroleum and Phoenix Petroleum cut prices of diesel by P2 a liter, unleaded premium gasoline by P1.25 a liter, regular gasoline by 85 centavos a liter and kerosene by P1.50 a liter.

The price rollback was in compliance with Executive Order No. 839, which ordered all oil companies to bring down prices of petroleum products to their Oct. 15 levels. The directive was issued by President Gloria Macapagal-Arroyo on Friday.

The order freezing oil prices will last while the state of calamity the President has declared “in the entire Luzon” is in effect. Ms Arroyo issued the order on Oct. 23 in the wake of the storms that devastated large swaths of Luzon, including Metro Manila.

Unioil Petroleum Philippine was the first to comply with the order on Sunday, followed by Petron Corp., Chevron Philippines Inc. and Seaoil Philippines.

At a meeting with Department of Energy (DoE) officials on Monday, Edgar Chua, country chair of Shell companies in the Philippines, said that the firm would comply with the presidential order, but warned of “serious implications, not only to the supply of products in the country, but also to investments.”

“Would you consider higher public interest for products to be cheap but not available, or for products to be expensive, reflecting the true cost, but available?” he asked.

Malacañang on Tuesday stood firm on the ceiling it set for oil prices despite warnings from companies like Shell that the policy could lead to a supply shortage.

Press Secretary Cerge Remonde said the Palace was not bowing to the threats and instead warned oil companies that “the government will use every power vested in it by law to put everything in order.”

P2/liter increase averted

In the Cabinet meeting in San Fernando City, Energy Secretary Angelo Reyes told Ms Arroyo that oil companies would have jacked up pump prices by another P2 a liter if not for EO 839.

Despite their objections, oil firms have all complied with the directive, according to Reyes.

Gary Olivar, deputy presidential spokesperson, reminded oil firms that the price ceiling was only a “specific and short-term response to the state of calamity.”

Blackmail

In a text message, Speaker Prospero Nograles cautioned the big oil firms against “blackmailing” the government with the threat of a supply shortage.

Nograles said that if the big firms pushed through with their threat to cut down on supplies, the government would have the justification to take over their operations to avert a crisis.

“A supply shortage will open a crisis in which government can interfere in accordance with the laws on the matter. This kind of threat or mild blackmail won’t fly,” he said.

With the threat of a shortage, oil firms are just presenting more arguments favoring the repeal of the oil deregulation law, according to Bayan Muna party-list Rep. Satur Ocampo.

“Giving the oil companies free reign over the entire industry has made them even more abusive,” Ocampo said.

The threat, he said, was another excuse to hide the oil firms’ plans to stockpile and withhold supplies.

Prices not transparent

The Consumer and Oil Price Watch (COPW) said it was noncompliance with the provisions of the Oil Deregulation Law that mandated the imposition of price control on oil products.

“If there was total transparency in the pricing of oil products, then the oil companies would not be suspected of predatory pricing, especially in the wake of the devastation brought about by Storms ‘Ondoy’ and ‘Pepeng,’” COPW chair Raul T. Concepcion said in a statement.

While the law gives the President the prerogative to institute price control during a calamity, this must be implemented only in the areas affected by the storms such as Northern Luzon and parts of Metro Manila, Concepcion said.

Clarifications

Shell vice president Roberto S. Kanapi said his company was seeking clarification with the DoE on a number of issues like the geographical coverage of the order since not all areas in Luzon were affected by Ondoy and Pepeng.

“While the intent of the EO is to prevent unreasonable increase in prices of petroleum products during a state of calamity, the consequences of the EO would be supply disruptions and negative impact on the investment climate in our country. We will continue to discuss these issues with the DoE-Department of Justice Task Force and other relevant government agencies,” Kanapi said.

Reduction in volume

To help curb revenue losses, Shell has decided to reallocate bigger volumes of its products to the wholesale segment, which may result in the reduction of the volume of products sold at its retail service stations.

He said Shell was expecting commercial and industrial accounts to start buying from retail service stations, which have lower prices, than be directly supplied by Shell.

“To manage this potential volume shift, which cannot be served by its retail sites, Shell will allocate fuel supplies to its retail stations in Luzon based on their average sales in recent months effective immediately,” Kanapi said.

Enough supply

Unioil Petroleum assured the public that it had enough supply of diesel, gasoline and kerosene for the local market.

Unioil general manager Chito Medina-Cue said the company could bring in fuel products from foreign suppliers within three days if there was a supply shortage in the local market.

“There is nothing to be afraid of as there is no shortage of supply in the international market for finished petroleum products. To bring in the products, we will just need three days at the most as long the appropriate government agencies will expedite the processing of documents for the release of imported fuels,” Medina-Cue said. With reports from Gil Cabacungan Jr. and Leila Salaverria