Trigger points

Perhaps inspired by the display of transparency of President Aquino who revealed the recent discovery of an alleged terror plot, government officials now warn the public about supposed possible oil shortage in the country.

The President earlier claimed alleged possible extremist plot to sow terror during the annual Black Nazarene procession last Monday. Well and good that no such terrorist incident took place as earlier feared. Perhaps, the government’s preemptive strike against suspected terrorists foiled it, if such plot really existed. Getting public attention  after government purportedly quashed already alleged terror plot in Metro Manila — seemed to have caught on with government officials. 

Taking the presidential early warning on terror plot as cue, authorities issued public notice about government’s contingency plans that include gasoline rationing in case of an oil shortage in the country. Out of the blue, the Department of Energy (DOE), headed by Secretary Jose Rene Almendras, made the warning last Wednesday.  

But the DOE warning obviously did not pass prior scrutiny of the President. Immediately after the DOE oil shortage crisis plans were made public, the Palace tried to tone it down with reassurances the government has already contingency measures in place to respond to specific scenarios.

Almendras yesterday admitted he was reprimanded over reports that a looming oil supply crisis could lead to gas rationing in the country. He explained it was just part of the scenarios in case of an oil supply shortage that would lead to a series of pump price hikes. He pointed out gas rationing is a contingency plan formulated ten years ago. Hence, these contingency plans are currently under review.

The DOE statement was issued in response to concerns that the price of world crude at the start of this new year has pulled up local pump prices. “As a matter of transparency, the DOE keeps the public abreast on international oil situation particularly, the factors affecting oil pricing,” the DOE cited.

The latest round of oil price hike was seen as a result of the ongoing tension in Iran that threatens the closure of the Strait of Hormuz, a key sea oil trade route in the Arabian Gulf. In fact, presidential spokesman Edwin Lacierda particularly referred to the Dubai oil price increase by $6 per barrel as the reason behind this week’s oil price hikes implemented by the “big 3” and small oil players in the country.

As we gathered from DOE, bulk of the country’s fuel supply, or around 80 percent of the total, passes through the conflict region. Ostensibly, this triggered concerns of a fuel shortage in the Philippines in case Iran’s conflict with the US and its allies affect the oil hub.

Oil prices have increased twice already since the start of the year. In the latest round of price hike this week, Eastern Petroleum Corp. increased diesel and gasoline prices on Tuesday by P1.50 and P1.75 per liter, respectively.

On the other hand, Petron Corp., Chevron (formerly Caltex) Philippines, Inc., Total Philippines Corp. and Pilipinas Shell Petroleum Corp. increased the next day their pump prices by P1 per liter for all gasoline, diesel and kerosene fuel products.

Lacierda assured the public though that the Aquino administration has already put in place contingency measures to stave off severe fuel price hikes due to tensions in the Strait of Hormuz. Lacierda said one of the measures is the reactivation of the subsidy program for transport groups under the Pantawid Pasada Program of the Aquino administration.

He specifically mentioned availability of some P200 million of these funds at the DOE that it can use to lessen the impact of the oil price hikes. This government subsidy mechanism is given to public transport groups to dissuade them from demanding higher fares. But that is just a tiny aspect of the problem.

But while he allayed fears of fuel rationing as just one of the contingency measures if the Middle East tension worsens, Lacierda confirmed the DOE is drawing up other solutions, including lowering the country’s consumption of fuel.

The DOE contingency plan reportedly is composed of three phases: the predict level, the prepare level, and the perform level. The predict level covers a pre-contingency scenario. Activities in this phase include coordinating and alerting government agencies on developments, monitoring and making up to date assessments of the situation. 

In the prepare level, the DOE is tasked to undertake preparatory activities in anticipation of a deteriorating situation to a higher level such as supply diversification, building up of oil inventories and foreign exchange, and securing of energy facilities.

In the perform level, the DOE implements fuel allocation, rationing, and conservation schemes in extreme supply disruption. It has prepared the mechanism for use during periods of possible allocation of gasoline and other vital fuel products.

But in the same press statement, the DOE pointed out the present tension in the Middle East and North Africa “is not seen to disrupt the local oil industry” since we do not buy and get our crude oil requirements from these affected countries. The so-called “big three” oil companies operating in the Philippines purchase crude and refined oil products from Asian sources.

The Aquino administration need not re-invent the wheel in the government’s oil supply contingency measures. It’s there at the DOE and they only need to adapt it or enhance the measures to cope with particular scenario.

All it needs is fine-tuning of the various calibrated measures in response to specific trigger points in oil crisis situation. This is to ensure no shotgun measures will turn the situation into a full-blown crisis.

President Aquino, a gun aficionado and who dabbles in target shooting, is trained on such trigger precision techniques. It would be reasonable to expect P-Noy to exercise the same prudence and expertise to handle crisis trigger points. This will prevent panic reaction that is much worse than the crisis itself.