Press Release
January 25, 2011

'1st in, 1st out' in sale of stocks also eyed
30-day 'waiting period' in oil price hikes sought

Government should now step in to mitigate the impact of the almost weekly price hikes in petroleum products by allowing oil players to tinker with their prices every 30 days.

Sen. Ralph G. Recto yesterday said the 30-day "waiting period" would give motorists and other oil-dependent sectors some breathing space before another price shock hits them.

"The weekly price increases are now taxing the patience and wallets of the public. The government could temper the accumulating national outrage by appealing to oil companies to do their increases every 30 days," Recto, Senate ways and means chair and energy panel senior member, said.

"Others may call this as prolonging the agony but for some, it's called buying time and hoping that time, in this very rare occasion, sides with the public," he added.

According to Recto, the "first in, first out" policy in the disposal of oil inventory should also be observed to complement the 30-day price hike "waiting period."

This means that oil stocks bought at lower prices or before any upward global price movement should be the first stocks to be sold to the public.

Executive Order (EO) 134, which complemented Republic Act (RA) 8479 or the Oil Deregulation Law, requires oil companies to maintain a minimum inventory equivalent to 15 days supply of petroleum products, except for Liquefied Petroleum Gas (LPG) which should have a seven-day inventory.

Oil refiners operating in the country, on the other hand, are required to have an inventory equivalent to 30 days.

Recto noted that a favorite alibi of oil players is that it could not immediately impose a price reduction when global prices go down since they apparently procured their inventory or stocks at higher prices.

Or old stocks bought at lower prices are disposed immediately at higher prices once global crude prices go up, according to the senator.

"The first in, first out policy would persuade oil companies to dispose their old stocks at the same prices that they bought it and not peg it based on current higher prices," he said.

He said the Department of Energy (DOE) is empowered by the law to monitor and conduct periodic checks on the inventory level of oil companies and determine which stocks are new arrivals or not.

Recto said the public would also be taking their chances with the 30-day waiting period "hoping that downward price movements outnumber the frequency of oil price hikes."

"Let's say the accumulated oil price hikes after the 30 days hit P3 while the accumulated downward prices were computed at P2, then the net increase should only be P1 per liter," he said.

Recto said that if by unfortunate twist of events, no price reduction develops during the waiting period, "the government could appeal to the corporate conscience of oil companies to share with the public the price burden." On Tuesday, pump prices of diesel were increased by P1 per liter while per liter of gasoline now cost 50 centavos more. Oil prices have increased three times since the new year.

The previous two fuel price increases this January had jacked up prices of gasoline by a total of P1.25 per liter and of diesel by a combined P1.25 a liter.

Pump prices of unleaded gasoline now cost at P50 to P50.25 per liter from the P41 per liter in January last year.

Last December, fuel prices went up twice for a total of P2.25 a liter for gasoline; P2 a liter for diesel; and P1.75 a liter for kerosene.

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