Local oil prices to remain stable — EIU

The Economist Intelligence Unit (EIU) Philippines Inc. said local oil prices will continue to be stable for the rest of the year.

"There are indications that oil prices will stay in the $22 to $25 range throughout this year," EIU president Peter Wallace said.

Wallace based his projection on the downturn in the US market where demand is expected to be softer.

"This has a major impact on oil prices, so if we have a slower demand in the US which is so far the biggest consumer of oil, then that will have an impact on suppliers who will now have excess supply. It will help keep the stability of oil prices in the next few months," he said.

The economist also noted that the peso has been gaining strength. "The pressure has been taken off, in peso terms," he said.

Together these two things will help keep the level of pricing relatively stable, Wallace said while acknowledging that there would be small price adjustments from time to time. "In a deregulated environment as the world price changes, the prices here change," he said.

He said President Arroyo is unlikely to interfere in the pricing of oil products.

"As we saw in the past administration, the president had always been using moral suasion on oil firms not to put up their prices so that got them into trouble," he said. "She’s (Arroyo) got a doctorate in economics why should she interfere, she understands these things, right?"

He also said that it is unlikely for oil companies to raise prices in the next two months. "I think, we are unlikely to see oil prices increases between now and the elections," he said.

However, in a study titled "Moving Forward: A Political and Economic Assesment of Macapagal-Arroyo Government," EIU said the uncertainties over world crude oil prices could affect Asia’s growth prospects this year.

"With prices falling well below the levels anticipated, the Organization of Petroleum Exporting Countries (OPEC) might decide to cut output, pushing prices up again," he said.

On the other hand, crude oil prices are forecast to be lower than their levels in 2000. The lower US growth expectation will also dampen global crude oil demand. "So this threat should gradually diminish over the medium-term," it said.

As this developed, Energy Secretary Jose Isidro Camacho said they would not be suspending anew the imposition of the three percent levy on imported crude oil. "There is no need to suspend it," Camacho said.

The former DOE administration suspended for three months the imposition of the three percent tariff. The suspension was lifted last Feb. 28.

Before President Macapagal-Arroyo took over the government, former DOE chief Mario Tiaoqui said they are willing to suspend anew by another one month the imposition of the said levy.

Trade and Industry (DTI) Secretary Manuel Roxas III, for his part, said they do not want to reimpose the suspension of the three percent customs duties on crude oil supply because of the country’s ballooning budget deficit.

"It contributes substantially to government revenues," he said.

Local oil firms an oil price increase is needed to enable them to cut operational losses. Caltex Philippines Inc. had raised its prices by five centavos last month to cover up some of its operational cost.

Petron and Shell, are also indicating plans to effect "very minimal" increase in the prices of their pump products basically to cover for the reimposition of the said levy.