MANILA, Philippines – President Macapagal-Arroyo will lift a three-week-long cap on petroleum prices on Monday, on condition that the oil companies agree to implement discounts and stagger future price increases.

The President acted on the recommendation of the Department of Justice and Department of Energy Task Force to lift Executive Order No. 839 following a meeting yesterday with oil industry executives, business leaders and representatives from the transport and labor sectors.

“Subject to compliance with the agreements we made today, can we now come to a consensus to lift EO 839?” she asked oil company executives.

She said “there should be no drastic increases” in fuel prices with the removal of the cap.

The President said price controls on prime and basic commodities would also end on Monday.

Ms Arroyo issued EO 839 on Oct. 24 ordering oil firms to maintain pump prices in Luzon at Oct. 15 levels to help the country rebuild after three typhoons destroyed nearly P39 billion in agricultural crops and infrastructure and killed 961 people.

The oil companies protested the cap, saying that they would be operating at a loss because of rising global crude prices, up 77 percent so far this year. The Philippines imports almost all its fuel needs.

Energy Secretary Angelo Reyes said on Monday the inventory of refined petroleum products in the country had dropped to between 8 and 13 days’ consumption from the usual 21 days as imports had slowed and supplies had dwindled at many gasoline stations.

One of the Big 3 oil companies, Shell Petroleum Corp., petitioned a local court to stop the order. But with the announcement of the lifting of EO 839, there was no longer any need to resolve the case, Makati Judge Winlove Dumayas said Friday.

Prepared to listen

“It’s a very welcome development. That means the government is prepared to listen to various sectors,” Ed Chua, the Shell country chair, told reporters as he emerged from the Palace meeting.

“The solution today is very good, in the sense that we can’t expect the oil companies to keep on losing, and at the same time recognizing the problems of consumers, especially drivers and laborers,” said Donald Dee, of the Philippine Chamber of Commerce and Industry.

According to Reyes, the proposed “safety nets” to be undertaken by the oil companies include the offer of price discounts in government-designated areas, more aggressive implementation of corporate social responsibility programs and assurance to put in more investments.

Chua said he and other industry executives fully supported the recommendations and would be sitting down with Reyes to discuss the “level of support” they would be giving.

The President said the fuel discounts “should be sufficient” to ensure that there will be no transport fare increases.

“At the end of the day, that’s the one that will affect the poor,” she said.

Cost recovery period

Albay Gov. Joey Salceda, the President’s economic adviser, said the government should ask the oil companies to implement their cost recovery over a period of four weeks for gasoline and diesel and six weeks for liquefied petroleum gas to avoid a price spike.

Zenaida Maranan, president of the Federation of Jeepney Operators and Drivers, appealed to the oil companies to retain the P28 wholesale per liter price of diesel for the transport sector until at least Jan. 1, 2010.

She said the transport industry may be able to absorb a P1 increase, but would be forced to ask for a fare increase if the diesel price goes up to P33.

She noted that oil companies earn P1.5 million a day for the 50,000 vehicles that buy up to 30 liters of diesel a day.

“As for us, we earn nothing if the price of crude is increased,” she said.

Subsidizing transport

According to an oil executive, considering that the oil companies started from a P52 per liter diesel price, they were in effect subsidizing the transport industry.

“We started rolling back the price after the Sona (State of the Nation Address). If I’m not mistaken, the current level is at P32 to P34. The landed cost of diesel is P31. It’s not because we want to earn profits, we only want to cut losses. I don’t think any business can sustain that kind of level because of the freeze,” he said.

Chua suggested that the oil companies could go back to issuing discount coupons for liquefied petroleum products through the Department of Social Welfare and Development.

Maranan also discussed the possibility of the transport groups directly importing their own petroleum supply, another suggestion of Salceda who said the government could extend a credit line of P10 billion to the sector.

Credit line

Ms Arroyo instructed Trade Secretary Peter Favila to study the possibility of extending a credit line to the transport groups for the oil importation program.

“The DOTC should organize a consortium. This will not include airconditioned buses. We’re talking of jeepneys which cater to the poor,” she said.

She said the Philippine National Oil Corp. or the Philippine International Trading Corp. could negotiate long-term supply contracts.

Favila said he has already issued a directive lifting price controls on basic and prime commodities to take effect on Monday.

He said there were three conditions requested of the traders—that there’s adequate supply and reasonable pricing and that there is discipline in the market.

A step back

Not everyone was happy with the government’s responding to the oil companies’ clamor to lift the price freeze.

Bayan Muna party-list member Teodoro Casiño said the repeal of EO 839 was “a step back for the people and reveals that the President is just after brownie points to compensate for her government’s failure over ‘Ondoy’ and ‘Pepeng.’”

Sen. Manuel Villar, a presidential aspirant, said he would have preferred for the fuel price cap to stay “but not too long.” He said Malacañang should not have allowed itself to be pressured by the oil companies.

Villar said the Oil Deregulation Law should be amended in such a way that the President would have more powers to deal with the issue of oil.