The Supreme Court’s (SC) directive to the country’s big three oil firms to vacate the Pandacan oil depot in Manila could cause fuel prices to go up due to the ensuing “logistics nightmare,” the Department of Energy (DOE) said on Wednesday.
Energy Secretary Carlos Jericho L. Petilla made this pronouncement when asked about the possible repercussions of the closure of the Pandacan oil depot.
“[Fuel] is going to be more expensive. Distribution cost will go up. How expensive? I don’t know,” Petilla said.
“But it’s also a free market. It’s their prerogative [if they will increase prices]. They may maintain prices to be competitive, or they may increase it to survive, but it’s an open competition,” he added.
Fuel prices have drastically gone down over the past weeks. An increase in prices on account of the High Tribunal’s order is not on the horizon, because it would take effect six months after the oil firms’ submission of an updated comprehensive plan and relocation schedule. Also, the oil firms could still file for a motion for reconsideration, which could push back their six-month timetable.
Petilla said he is more apprehensive about the need to deliver aviation fuel, considering a truck ban is in place. The truck ban in Manila has caused monstrous traffic and delays in the delivery of commodities.
“What worries me is not so much the supply because the supply is there. What I have to ask them is have they prepared for aviation fuel? If the depot will be relocated in Batangas or Bataan, we see problems due to the truck ban,” he said.
“If fuel will come from Batangas, they have to be smart in deploying their trucks because the area is already congested plus there is a truck ban in Manila. Basically, it will simply be a challenge for them because there is a problem of transporting the fuel,” Petilla added.
When asked if he will push for the lifting of the truck ban, Petilla said he will urge oil firms to do a simulation and coordinate with the Metro Manila Development Authority.
The SC gave respondents Chevron Philippines Inc., Pilipinas Shell Petroleum Corp., and Petron Corp. 45 days to submit an updated comprehensive plan and relocation schedule. After which, they are given six months within which to move out of Pandacan.
The SC issued the order after it declared unconstitutional and invalid Manila City Ordinance 8187, which allows continuous operation of the Pandacan oil terminals by the country’s major oil companies.
Petron and Shell, in separate statements, said they will comply with the High Court’s ruling. “Petron respects and will abide with the SC’s decision to cease operation of Pandacan terminal,” the country’s largest oil refiner said on Tuesday upon release of the SC order.
When sought for comment, Petron Chairman Ramon S. Ang said in a text message that “Petron will comply.”
In May Ang said Petron is committed to leave Pandacan next year. “By end of 2015, we are totally out of Pandacan. We have started to transfer our depot, for example in Limay, Bataan; Rosario in Cavite; and in Navotas. We are law-abiding citizens.”
“When we promised the city government of Manila that within five years we will be moving out of Pandacan, we will. I think we are the only oil firm in compliance to that promise,” he added.
Ang assured that the relocation would not result in any fuel-price increase. He said Petron’s operational costs could even go down upon relocation of its oil depot to new sites. The oil firm is spending P15 billion for the transfer.
Shell, for it part, said it could not further comment until its lawyers have secured an official copy of the decision. “We have yet to receive the court order to enable us to
comment further. Rest assured that Shell will observe the rule of law and good governance.”
Petilla said he thinks the oil firms can make do with the six-month period. Chevron, for one, has started to move out of Pandacan in June.
“For Petron and Shell, they already have interim plans. I just don’t know how advanced their plans are. Petron has since started to move out. For Shell, I don’t know if they are going to implement it now,” he said.
Some lawyers said it would be difficult to convince the court to reverse its November 25 decision. Out of the 12 justices, 10 voted to declare the Manila City Ordinance unconstitutional. “It’s going to be tough. They can file for a motion of reconsideration but a court that voted 10-2, seems difficult to convince otherwise. It will take seven of them to overturn the decision,” noted one lawyer who requested for anonymity.
Another industry lawyer said the oil firms are already aware of this but filing for a motion for reconsideration could give the oil firms more time, much longer than six months.
“On the other hand, it will delay the implementation which could mean that it will delay everything,” the other lawyer said.
None of the oil firms replied when asked if they plan to file for a motion for reconsideration. Petilla, however, said it’s their prerogative.
“It will be up to them to appeal the decision but I think in the past, they’ve seen this coming already and they have contingency plans. Personally, I think, even if you appeal it, if the LGU [local government unit] is really against you then you will have a hard time. It’s going to be difficult to relocate in other areas where you are not welcome,” he said.
The energy chief said he will ask the oil firms to submit their respective contingency plans.
“We will now ask them what their contingency plans are for our own internal consumption,” Petilla said while adding that new permits from the LGU would have to be secured before relocation.
“Actually they have other depots now. What will only happen is that they will close down their operations in Pandacan. They will just continue operations in their other depots or refineries. The thing is their distribution cost will be more expensive,” he added.
For now, Petilla’s fears—a possible fuel price hike, logistics difficulty and horrendous traffic—will have to take a back seat until the oil firms have vacated the Pandacan oil depot.