By Luz Wendy T. Noble, Victor V. Saulon with Arjay L. Balinbin, September 24 2019; Business World
Image Credit to Business World
THE INFLATION TARGET and forecast of the Bangko Sentral ng Pilipinas (BSP) are in no immediate risk of increasing, judging from latest world oil price movements that have so far remained within acceptable bounds, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Monday.
“Wala (No change),” Mr. Diokno said after a Senate committee hearing — three days ahead of monetary authorities’ sixth policy review for the year on Thursday — when asked on any need to change the BSP’s current 2019 inflation forecasts and targets in the face of latest oil price movements after the Sept. 14 attack on Saudi Aramco processing sites.
That strike slashed Saudi Arabia’s output by 5.7 million barrels a day — about half the kingdom’s and five percent of the world’s production.
The BSP has a 2-4% inflation target range for this year, as well as downgraded forecast full-year averages of 2.6% for 2019 and 2.9% for next year and 2021, as of July.
“The price of oil has to reach $90-95 per barrel (/bbl) bago maapektuhan ’yung forecast namin (before our forecast will be affected),” Mr. Diokno explained, up from the $85/bbl threshold he gave last week.
The Development Budget Coordination Committee itself has a $60-75/bbl assumption for 2019-2022 budgeting purposes.
Price of Dubai crude — the benchmark for Asian fuel pump prices — jumped to $63.86/bbl on the Monday after the Sept. 14 Saudi attack on from $58.24/bbl the preceding Friday, peaked at $67.55/bbl on Tuesday but has since been easing to reach $53.56/bbl yesterday.
“Bumabalik na e, nagno-normalize na. ‘Di ba sabi ng Saudi before the end of the month, normalize na di ba (Oil prices are normalizing, haven’t Saudi Arabia and Aramco said that production should be fully restored by the end of this month)?” Mr. Diokno said.
Reuters reported on Monday that Saudi Aramco has pushed back crude and refined product deliveries to customers by days following the attack.
NO NEED FOR INTERVENTION
Also on Monday, the Department of Energy (DoE) dismissed calls for it to intervene in the local pricing of petroleum products after oil companies announced a hefty increase in the price of gasoline, diesel and kerosene for the week.
“It’s not yet the situation,” Energy Secretary Alfonso G. Cusi told reporters after a briefing in Cebu City during a regional conference attended by electricity supply entities. “When the time comes, we can intervene.”
“Nag-correct naman agad, immediately,” he said, referring to prices in the international market from which the Philippines sources bulk of its fuel supply
This week, oil companies advised a hefty price increase for gasoline, diesel and kerosene. Prices of gasoline products will rise by P2.35 per liter, the biggest hike so far this year. The cost of diesel and kerosene will increase by P1.80 and P1.75 per liter, respectively.
The Philippines imports about 96% of its crude oil requirements, of which 90% comes from the Middle East, mostly from Saudi Arabia.
Asked about his price projection next week, Mr. Cusi said: “Based on the indication ngayon, hopefully, praying it will go down.”
He also reacted to the rejection of oil companies of the DoE proposal to increase their inventory equivalent to 60 days. “It is something that is fluid. We are studying what is good for the country,” he said.
In a meeting with oil companies last week, the DoE said the discussions revolved around the strict implementation of the minimum inventory requirement (MIR), which is equivalent to stocks of 30 days for oil refiners, 15 days for bulk marketers, and seven days for liquefied petroleum gas players.
Representatives of oil companies said raising the MIR to 60 days would mean the immediate creation of additional infrastructure. They also said the added logistical demand might prove costly and detrimental to their existing operations.
At the Senate, the energy committee asked the DoE for “blow-by-blow” updates and for the contingency measure in place or will be in place “so that the public will be assured that there will be no supply disruptions to our transportation as well as our industries.”
“Pricing is also very important, considering that this is a deregulated industry, we’ve given a free hand to the private sector to do business, to import, to sell and to transact,” said Senator Sherwin T. Gatchalian in his opening statement during a Senate inquiry on Monday.
“However, government needs to make sure that the public is protected and the public is not being abused by any shock or any aberration happening.”
Malacañang on Monday said it will “study” the possible issuance of an executive order to form an inter-agency task force that will address possible oil supply disruptions. “We will wait for their request, and the Palace, the Office of the President, will study it,” Presidential Spokesperson Salvador S. Panelo said at a briefing at the Palace when asked to comment on DoE’s request for an EO to form the task force.
The task force, according to the DoE, “will formulate strategies to address supply disruptions” and implement the agency’s “Oil Contingency Plan.”
It will consist of the DoE as chair, with support from the Department of Trade and Industry, Department of Agriculture, Department of National Defense, Department of the Interior and Local Government , Department of Transportation, Department of Foreign Affairs and the National Security Council. — Luz Wendy T. Noble, Victor V. Saulon with Arjay L. Balinbin