Oil firms should stop acting like a cartel

I still think it is a bad idea to regulate the oil industry again. That will not bring down oil prices in the domestic market if the international price of oil is still in the stratosphere. The communist groups masquerading as NGOs are misleading the public on this point.

However, the oil companies must stop acting like a cartel. They move prices up and down almost at the same time and for the same amount. At the very least, there should be a difference between the two oil companies with refineries here and those who just buy from the spot market in Singapore or elsewhere. Those with refineries should reflect changes in international prices later than those who merely buy from the market.

By moving on prices like a pack of wolves, the oil companies give credence to the view of their critics that deregulation is a sham. For deregulation to be more credible, we should have a scenario like that in the United States where pump prices really vary from brand to brand. During my last visit to Los Angeles three months ago, I noticed my relatives there make a conscious note of the displayed prices before loading because prices are significantly different.

It is also a pity that the Department of Energy has abdicated its duty to monitor prices to Ronnie Concepcion’s Citizens Price Watch. When I was with the energy ministry, Orly Galang who was Director for Energy Utilization can tell anyone, anywhere the details of international price movements. Orly knew the oil industry inside and out and the oil companies knew they could not pull a fast one with him. We need someone as competent as Orly Galang, specially now that we are deregulated.

Unfortunately, all we have now are clueless bureaucrats and of course, good ol’ Ronnie Concepcion, the amateur oil man. Our tragedy today is not that the industry is deregulated but more because the energy bureaucracy seems less than competent to deal with it.

Ethanol

Another example of why I have given up on our energy officials is the recent press release of Energy Secretary Vince Perez about how sugar based ethanol is about to save us from high gasoline prices. My suspicion is, wala lang masabi si Vince. I am sure he does not know what he is talking about. Don’t get your hopes high, folks, ethanol is not about to give us cheaper gasoline any time soon.

It is true that ethanol is an interesting possibility. It is being used in the United States as an octane enhancer. We have tried that too in our time, as alcogas in Bacolod, and we nearly got lynched for the effort. There were some technical problems then but I am sure these can be overcome if we had the money to buy technology from the US or Brazil.

The big problem with ethanol is, as I remember it, economics. Alcohol is more expensive than gasoline. I do not know the numbers now, but this is a key hurdle. That‘s the same problem too with coco-diesel. The refined coconut oil that could be used to extend diesel is also more expensive than diesel itself. In both cases, government had to subsidize the difference.

So, let us be clear about this ethanol business. It is not likely to cause gasoline prices to go down. We should consider ourselves lucky if the program does not call for some government subsidy or incentives. But it is a worthwhile program to develop if only because it is local and renewable.

In fact, if we want to be even more radical, let us talk of 100 percent alcohol as in Brazil. If we have the right car engine (which VW has produced), the 100 percent alcohol route is less technically problematic because it calls for hydrous alcohol. The five or 10-percent mix that Vince is talking about, is tricky because that‘s anhydrous alcohol and our oil logistics system contaminates it with water. Once water mixes with the alcogas, the alcohol separates from the gasoline and causes all sorts of engine problems.

One other thing we have to make sure of is the commitment of the sugar industry to supply the sugarcane for this purpose for the long term. We can’t have this program one season when sugar prices are down and the sugar industry refusing to provide supply of sugar for alcohol when the export market is booming. We may end up putting up billions of pesos in investments on an ethanol refinery and an appropriate logistics system only to be told by the sugar industry that they cannot produce or supply the raw material.

I don‘t have the figures now but I remember that the hectarage required for sugarcane planting to support the program was more than what was available. The sugar industry will have to work double time to improve productivity so that no subsidy is needed to make the alcohol competitive to petroleum. And yes, the tax code will have to be revised so that alcohol destined for the gas tanks is not taxed like sin products destined for the night clubs.

If Vince was doing something more significant than grandstanding, he would have included details on the economics and technical viability of these measures. It is wrong to bring people’s hopes up and not deliver. I hope Vince realizes alcohol in gasoline is a long shot, if we are thinking of moderating prices.

It is unfortunate Vince now sounds like the over promising politician. What we need at the energy department is more of the responsible technocrat. Otherwise, he should just run for Congress.

Defense Civilian

It is good that President Arroyo appointed a civilian to head the defense establishment. It is about time that the military gets used to a civilian boss. However, I am not sure the right civilian was selected.

I still think Vice President Noli de Castro should have been it. The defense portfolio is the best training ground for Kabayan Noli, who must be ready to assume the presidency in a heartbeat. I know there are those who belittle the abilities of Noli, and Ate Glo may be one of them. But then again, Noli‘s the elected Vice President. Like it or not, he must be trusted with power.

I thought DSWD was a bad enough choice for Noli. But assigning the Vice President the task of being the government’s realtor demeans the position. The housing program is important, but being head of HUDC isn’t exactly going to provide the right all around training for a Vice President. It is a safe position from the perspective of the President. But it isn’t fair to Noli or the country.

Maybe shunting Noli off to housing is one way of saying Noli has served Ate Glo’s electoral purpose and it is time to exile him somewhere out of sight. On the other hand, putting a former partner of The Firm in Defense makes Ate Glo feel secure even if her credibility suffers in the process.

Gentle Dentist

This one was forwarded by Carla Sison, one of my associates in the corporate communications game. She claims it came from one of her former professors. Carla’s a licensed but non practicing dentist.

A guy and a girl meet at a bar. They get along so well that they decide to go to the girl’s place. A few drinks later, the guy takes off his shirt and then washes his hands. He then takes off his pants and washes his hands.

The girl watches him and says: "You must be a dentist."

The guy, surprised, says: "Yes ... how did you figure that out?"

The girl says: "Easy... you keep washing your hands."

One thing led to another and they made love. After they were done, the girl says: "You must be a great dentist."

The guy, now with a boosted ego says: "Yes, I sure am a great dentist... How did you figure that out?"

The girl says: "Easy... I didn’t feel a thing!"

Boo Chanco‘s e-mail address is [email protected]