MANILA, Philippines – The Department of Energy (DOE) is studying the possibility of oil stockpiling to take advantage of the hefty drop in fuel prices.
Energy Secretary Zenaida Monsada has ordered state-run Philippine National Oil Co. (PNOC) to conduct the study determining the feasibility of oil stockpiling.
This is one of the main tasks of PNOC this year.
“They have started reviewing earlier studies on stockpiling,” Monsada said. “Although they still have to hire a consultant, they are required to make a report within the year.”
Stockpiling is a practice common among developed countries, such as the United States and Japan, to address supply disruption. Strategic stockpiles act as reserves and are released only during times of supply disruption, thus only crude oil is generally maintained in strategic stockpiles.
Monsada noted the Association of Southeast Asian Nations (ASEAN) has recognized stockpiling as good energy security move.
However, in today’s case, stockpiling may help the country deal with the eventual price spikes in the global crude market. Crude prices have declined over 50 percent to around $30 per barrel from around $90-100 per barrel in 2014.
As of the moment, the DOE has no plans to take advantage of low oil prices due to lack of facilities and the question on who will undertake stockpiling. This may also require legislation to gain the support of the State.
“We have no plans yet since we have no storage facilities. We also have to determine if government can undertake it since Petron Corp., which used to be partly-owned by PNOC, was already privatized,” Monsada said.
“Most countries that undertake stockpiling went through legislation because they need support. Japan, for example, gave a special interest rate for its stockpile,” she added.
Determining the storage facility and who will shoulder the inventory carrying costs will form part of the PNOC study, the energy chief said.
“Also part of the study is [identifying] whether the reserve should be strategic or commercial,” Monsada added.
Strategic stockpile can only be tapped when there is an oil shortage, not when prices go higher. Commercial stockpile, on the other hand, can be sold depending on the timing and pricing in the market.