DOE explains objections to proposed oil exchange

The Department of Energy reiterated yesterday its opposition to the proposed creation of a national oil exchange corporation (NOEC).

Energy secretary Mario Tiaoqui explained that the establishment of a NOEC will not be a guarantee that the prices of oil products will go down, contrary to what the proponents of the bill are claiming.

The idea of establishing the NOEC was introduced by Rep. Enrique Garcia Jr. in House Bill No. 8710 entitled "An Act Restructuring the Oil Industry by Establishing A National Oil Exchange, and For Other Purposes."

Under the bill, the NOEC will essentially be a government owned and controlled corporation which shall determine the country's total monthly requirements for refined petroleum products as well as exclusively handle all the purchases, storage and distribution of these products to the distributors and consumers.

Garcia explained in his bill that the purpose of establishing the NOEC is to eliminate the "stranglehold of oil monopolies, cartels and oligopolies" and "encourage the open and transparent participation of all the oil refineries and traders the world over within an oil exchange system in the Philippines."

Energy Undersecretary Cyril del Callar who attended the hearing on the bill the other day noted that Garcia introduced a number of amendments to the bill which supposedly were based on the concerns raised by the DOE.

However, Del Callar said Garcia did not actually present any solutions to the concerns raised by the DOE, particularly on its primary objection to the creation of a single entity that will solely handle the supply and distribution of the country's oil requirements.

"Essentially, this is a shift from the perceived oligopoly to a real monopoly," Del Callar said in contrast to the claims of the bill. "At the moment the NOEC proposal is still the same as it was originally filed, hence our position rejecting it remains," he added.

Furthermore, he explained that the establishment of the NOEC will kill the competition in the market place and reverse the gains achieved from the deregulation of the downstream oil industry.

"Essentially, all the oil companies operating today will just become gasoline stations," he said.

Another point raised by the DOE was the Petroleum Electronic Pricing Exchange (PEPEX) which the supporters of the bill are using to push the creation of the NOEC. Tiaoqui noted that the proponents are relating the NOEC to the PEPEX which he claimed does not make any sense.

"This is the height of sophistry. Because in reality, the PEPEX is nothing more than trading in oil futures, just like what is done in the commodity market," Tiaoqui said. Del Callar added that the PEPEX is nothing more than e-commerce where people can purchase commodities over the Internet.

Tiaoqui stressed that the NOEC is "an extremely expensive and uniwidely undertaking, and is entirely experimental in nature." "While it is reporting pogi points for its principal proponent on the propaganda front, it could turn out to e a disastrous 'Tet' offensive for our country," Tiaoqui said. -- Marvin Sy