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    Oil prices next Arroyo crisis
    First posted 00:34am (Mla time) Aug 12, 2005
    By Gil C. Cabacungan Jr. , Abigail L. Ho
    Inquirer News Service


    IN THE MIDST of the worst political crisis of her presidency, here comes another whammy for President Macapagal-Arroyo.

    With record crude prices that could weaken the economy and undermine her administration, President Arroyo yesterday called on the public to adopt energy conservation measures.

    "The entire nation, all sectors and communities must engage in a serious effort to conserve energy and support all means to bring down our overall consumption of energy and exploit alternative sources of fuel,'' the President said in a short speech at a Flying V gas station which launched its bio-diesel fuel.

    Analysts estimate that every dollar increase in the price of Dubai crude (which hit a record $57 a barrel yesterday along with New York crude which rose to a historic $65 a barrel) adds some P500 million to the country's oil bill. Oil refiners in the country use Dubai crude to calculate their retail prices.

    A top investment analyst in one of the world's largest foreign banks operating in the Philippines said "sky-high oil prices were a far bigger threat to the survival of President Arroyo than the political scandals she is facing.''

    Ms Arroyo is facing a widespread clamor for her removal from office over allegations of poll fraud. Three impeachment complaints have been filed against her in the House of Representatives.

    The analyst, who declined to be named, said the oil problem was likely to get worse before it got better.

    "If oil prices are already setting record highs this summer for Western countries, just imagine how much oil prices will increase during the winter season,'' the analyst said.

    Ms Arroyo said the oil price situation had become a serious problem because "crude oil is now worth $65 in the US and it was only $30 one and a half years ago."

    With little alternative to oil imports to fuel motor vehicles, ships, airplanes and power plants, the President and business leaders agree that the best solution to the oil crisis is to cut down on the country's consumption of 330,000 barrels a day.

    "This is not a simple test of our resiliency but a real challenge to our economic survival. Let us act now to avoid complications later,'' Ms Arroyo said in a statement.

    Since the start of the year, gasoline prices have increased 14 times by a total of P7.35 a liter, while diesel fuel prices have risen 14 times by a total of P7.05 a liter.

    Premium unleaded gasoline now retails at between P31.55 and P33.30 a liter, diesel at between P28.85 and P30.19 a liter, and kerosene at between P30.45 and P31.51 a liter.

    Fuel prices will further go up once the Supreme Court lifts its freeze order on the 10-percent expanded valued-added tax. The high court is expected to lift the order this month.

    Oil firms in the country, which have not been able to catch up with the surging world prices fast enough, said they still had room to raise the price of unleaded gasoline by another P3 a liter in the coming weeks. The retail price of diesel could still go up by 80 centavos a liter.

    In an interview with dzRH radio on July 29, the President indicated that more extreme measures would be undertaken to cut down on oil consumption.

    "In the coming months, if oil prices will increase further, we will reach a point that we have to go into rationing,'' she said.

    "Instead of speculating on the price of oil, it's better that we have a contingency plan for every stage of price increase.''

    Ms Arroyo ordered the Department of Energy to raise public awareness on oil prices through regular bulletins.

    Philippine-US Business Council chair Ramon del Rosario Jr. said "rising oil prices pose a dangerous threat to our country's economic and political stability."

    To get the country through the growing crisis, it needs credible leadership with strong support from the people, Del Rosario said.

    Some businessmen felt it was time the country's politicians put politics in the back seat while focusing on how to address the oil problem.

    Economic slowdown
    "We have always been concerned with the negative impact of runaway petroleum prices on our fragile economy. I really hope that this time, we can concentrate on economic issues rather than political matters," said Francis Chua, president of the Federation of Filipino-Chinese Chambers of Commerce.

    Based on its planning programs, the Department of Energy has set two scenarios in which Dubai crude prices would hit $60 and $70 per barrel.

    For every $10 increase in the price of a barrel of Dubai crude, the government expects the country's economy as measured by the gross domestic product to go down by 0.10 percent and inflation to rise by 0.4 percent to 0.5 percent.

    Data from the Department of Energy showed that the regional benchmark Dubai crude had skyrocketed to an average of $55.08 a barrel in the Aug. 1-10 period, more than $2 higher than the July average of $52.83 a barrel.

    The price of unleaded gasoline based on the Mean of Platts Singapore (MOPS) benchmark for refined petroleum products also soared to an average of $69.12 a barrel in the first 10 days of August from $64.70 last month.

    MOPS-based diesel, however, dropped to an August average of $69.60 a barrel from the July average of $71.38.

    Diesel prices to rise
    While diesel prices had not gone up as much as unleaded gasoline prices over the past three months, Energy Undersecretary Peter Anthony Abaya said there was a big possibility that world diesel prices would eventually rise as fast as that of unleaded gasoline.

    Although the price of unleaded gasoline had gone up by 54 percent since last December and that of diesel by 35 percent, Abaya said this was no reason to believe that diesel prices would remain relatively flat in the coming months.

    The energy undersecretary said diesel prices could suddenly skyrocket with the advent of the winter months as diesel is used as a heating fuel during winter.

    He said diesel prices could reach the $80-a-barrel mark by then, higher than the record price of more than $77 a barrel.


    ©2005 www.inq7.net all rights reserved
 
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