POSTSCRIPT / November 10, 2005 / Thursday


Philippine STAR Columnist

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Selective boycott of oil firms will work only if...

BOYCOTT FAILS: What ever happened to the idea broached by disgruntled motorists to boycott Shell and Caltex and buy fuel only from Petron or the small players to force the foreign oil giants losing sales to lower their prices and thereby foment a price war?

I have asked around and I want to report that, for whatever reasons, the idea apparently has not caught on.

Why would it work when most people are not even aware of the action plan? The boycott proponents were mostly campaigning by email in the Internet. And how many motorists have email and Internet?

As of yesterday, the 40-percent share of Petron of the market has not grown appreciably, except for a slight rise in the sale of Xtra Unleaded, its new product with a 93 octane rating. It is cheaper than other products of higher octane rating and reportedly gives more kilometers to the liter.

Data gathered suggest that if a selective boycott fails, it is not because Petron or the small players will not be able to handle the surge in demand when motorists skip Shell and Caltex products on a grand scale.

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DOUBT RAISED: Misgivings about a selective boycott against Shell and Caltex had been expressed by some readers.

AMFontanilla, for instance, said: “Petron/small players could run out of supply. Then they would run to Caltex and Shell. Caltex and Shell become wholesalers. They could close all their gas stations and sell them to Petron/small players. Then what?”

Reymundo F Yambing said: “Granting (mostly) everyone buys Petron products, where does Petron get the increase in refining capacity to sell 80 percent of the market instead of its present 40-share share? They will buy from Shell and Caltex, as they currently do — trading among themselves! Unfortunately, we do not dictate what prices the market will buy and sell. This is a reality beyond the control of a ‘pygmy’ petroleum user like the Philippines !”

Bobby Tordesillas said: “It will work only if Petron cooperates with consumers and does not increase its price. Otherwise the strong demand for Petron may only encourage it to increase its prices even further.” But he did not cite the possibility of Petron buying from Shell and Caltex to fill the added demand.

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INDUSTRY BORROWING: Will Petron buy gasoline from Shell and Caltex if almost everybody flocks to its service stations?

Industry sources said Petron buying additional stock from the two foreign oil firms was unlikely. What is likely to happen, they said, is for Petron to import the additional supply it may need — as Caltex is now doing after it closed its refinery in Batangas.

Do oil firms routinely buy gasoline from one another to resell?

No, it does not happen that way, I was told. What they sometimes “borrow” from one another is a base blend, a kind of generic fuel that is enriched later with an oil firm’s unique additives at its depot to conform with its market brand’s specifications.

The problem with an unusual surge in demand, sources said, is not about supply (which can be imported) but about storage and distribution. Oil firms do not maintain excess storage and distribution facilities so may not be ready for suddenly soaring demand.

What the proponents of a selective boycott should do is to push wider their campaign and not be bothered by the possibility that the one firm left standing would just buy from the losing companies.

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FIGHTING A GIANT: Tordesillas also recalled a rates competition they encountered when he was with the National Shipping Corporation of the Philippines (a transPacific container liner shipping firm) competing with the big international shipping lines.

He said: “We were able to stabilize the Manila-to-US West Coast freight rates for several years by refusing to follow the general rate increases set by the ANERA, an oligopoly of the big international shipping lines. When the ANERA increased their freight rates across the board, we did not follow.

“The ANERA would lose a big chunk of the market as consumers shifted their bookings to our company. After a while, the ANERA would revert to the old rates. They would try this several times and fail.”

He added: “The government should exercise its muscle in the Petron board, and insist that the oil firm should not follow the moves of other oil companies. If it cannot afford to do so, it should at least be several pesos cheaper than their prices. It should also pioneer in the use of alternative fuel and be the sole supplier of all government oil-consuming assets.

“If Petron will not follow government directives, the administration should sell all its shares, and set up another trading company, use the money to set up oil depots and import the refined petroleum products directly.”

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BACK IN THE STATES: A related development in the US may give our probe-prone senators an idea.

It says here that top executives of three major oil companies in the US will be asked by senators why some of their industry’s estimated $96 billion in record profits this year should not be used to help people having trouble paying their energy bills.

The industry executives to be questioned at a Senate hearing include Lee Raymond, chairman of Exxon Mobil Corp., Jim Mulva, chief executive of ConocoPhillips, and John Hofmeister, president of the US unit of Royal Dutch Shell PLC.

Together, the three companies earned more than $22 billion during the third quarter when crude prices soared briefly to $70 a barrel and motorists were paying over $3 per gallon after killer hurricanes hit the Gulf Coast .

Sen. Charles Grassley (R-Iowa), finance committee chairman, said oil companies should do their part and donate some of their third-quarter earnings to low-income families and senior citizens having trouble paying energy bills. Some 29 major oil and gas companies are expected to earn $96 billion this year.

House Majority Leader Dennis Hastert (R-Ill.) urged oil companies to invest more earnings in new refineries. He did not rule out taxing oil company windfall profits. “Consumers are increasingly feeling that they are being taken for a ride,” Sen. Larry Craig (R-Idaho) said at a recent hearing.

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NEW U.S. ENVOY: The Philippines may have its first female US ambassador before Christmas, in time to preside over her embassy’s handling of the sizzling issues raised by the alleged rape of a Filipina by visiting US servicemen.

Career diplomat Kristie Anne Kenney, formerly ambassador to Ecuador, will take her post five months after Washington pulled out its full-time chief of mission, Francis Ricciardone, in Manila.

Earlier, Ambassador Cameron Hume’s name was submitted for Manila’s agrement, but was withdrawn in June after the Philippines already accepted the nomination.

Kenney is said to be the personal choice of US Secretary of State Condoleezza Rice. We don’t know if that is an indication of how Washington regards the Arroyo administration, but our Ambassador to Washington Albert del Rosario noted, “She (Kenney) was handpicked by the Secretary of State, so I presume she’s very good, and we look forward to working with her.”

Prior to Ecuador, Kenney was senior advisor to the Assistant Secretary for International Narcotics and Law Enforcement at the state department. Earlier she served as economic counselor in Geneva, economic officer in Argentina, and consular officer in Jamaica.

She holds a master’s degree from Tulane University and a bachelor’s from Clemson University. She also attended the National War College. This native of Washington, DC, speaks Spanish and French.

From 1998 to 2001, she served as executive secretary of the state department, the first woman to hold that key position on top of a staff of 185 persons responsible for inter-agency policy coordination and crisis management working directly for Secretaries of State Colin Powell and Madeleine Albright. She led the state department transition team from the Clinton to the Bush administration.

In her younger days, she was a page for the US Senate, a tour guide in the Capitol, and an intern in the House of Representatives.

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(First published in the Philippine STAR of November 10, 2005)

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