An Appeal to President Gloria Macapagal - Arroyo to lift EO – 839

Dear Madame President,
  
We are one with you in wanting to help the victims of typhoons Ondoy and Pepeng. We believe, however, that freezing the prices of fuels throughout the entire island of Luzon to help the typhoon victims, found only in several provinces in the North and in some areas of Metro Manila and outlying provinces, carries disastrous short- and long-term risks for the whole country, including eventually the very people we want to help.

The imminent danger to the economy, business, and employment from freezing fuel prices far outweighs the intended benefits. A weakened oil sector, forced to sell at a loss, cannot continue to play its strategic role as the government’s partner in the nation’s growth and in ensuring an adequate level of supply given the instability of world prices of crude oil and petroleum products.

When we state the resulting supply shortages that will occur as a result of Executive Order (EO) 839, it is not intended to blackmail government nor to sabotage the economy but simply to advise what the consequences of EO 839 will be.

Our industry has been accused of not being transparent and not wanting to open our books. This is farthest from the truth.

• Our books have always been open to the public because we regularly submit our financial statements to the Securities and Exchange Commission (SEC).  Anyone who wants to scrutinize our books can simply go to the SEC. 

• The Department of Energy (DOE) has also formed independent commissions to audit our books, namely, the 2005 Alindada commission and the 2008 SGV/University of Asia and the Pacific commission. Both commissions did not find evidence of cartelization or overpricing.  In fact the Alindada Commission concluded that the average industry returns from 1998 to 2004 was at 3%, which was well below the treasury bill rate of 7% at that time.

• What we have resisted is for the Commission on Audit to open our books, as it is not in their mandate to audit private companies. The Department of Justice has upheld this position.

As for transparency, we regularly submit voluminous trade information to the DOE, who religiously monitor our prices and compare it with international prices, i.e. Mean of Platts Singapore (MOPS).  Anyone who subscribes to MOPS can compare our prices and do a landed cost computation.  For the period October 9-13, the average Singapore MOPS for Diesel was $85.03 per barrel (FOB).  To convert this FOB price to Pesos per litre, one simply multiplies it by the forex rate (P 47.47 per USD at that time) and divides by 159 litres per barrel.  Then add 3% duty and 12 % VAT which will result in a price of P 29.29 per litre.  Please note this does not include sea freight to the Philippines, insurance, storage and handling, delivery to the stations, dealer’s and oil company margins and miscellaneous charges.   Yet we are being asked to sell at P 28 per litre or below, which were the prices prevailing during 15th October 2009.

Madame President, we humbly request that you allow us to discuss these matters with you and to explain our side and how we can better assist those who are really in need of support, without damaging the economy and driving away investors.

We know that everyone wants low prices and this is a popular move for now. But you have always said that your objective is not to be popular but to do what is good and right for the country.  All of us have responded to your call to assist and have been responsible corporate citizens and we are prepared to do more. Please allow us to sit down and discuss with you, so that you may consider recalling EO 839.

We strongly urge you to consider our request so that we can all move forward and focus on our core priorities of nation building and the rehabilitation of the areas affected by the typhoons.

Dean A. Lao, Jr.
COO
Chemrez Technologies

Fernando Martinez
Chairman and CEO
Eastern Petroleum Corporation

Joey Cruz
VP for Retail Marketing
Flying V, TWA, Inc.

Orly Casa
CEO
Int'l Engineers Phils. Inc.

Patrick Libihoul
President
Liquigas Philippines Corporation

Sally Monteiro
Executive Director
Philippine Institute of Petroleum

Edgar O. Chua
Chairman and President
Pilipinas Shell Petroleum Corporation

Salvador Escano
CEO
Pryce Gases, Inc.

Siripong Phoungpaka
President & CEO
PTT Philippines Corporation

Glenn Yu
President and CEO
Seaoil Philippines, Inc.

Kathleen Santiago
President
TOTAL Dealers Association

Ernst Wanten
President & Managing Director
TOTAL (Philippines) Corporation

Mary Ann Villavicencio-Sy
President
USA88, Filpride Energy Corporation