Missed opportunity

The Department of Energy, before the Marcos administration, had issued Department Circular 2021-09-0028 seeking to establish the Philippine Strategic Petroleum Reserve Program, which was a squandered program that would have softened the impact of the successive oil price increases.

A national petroleum reserve would have significantly helped shield the country against global supply and price disruptions, considering that the country is a net importer of petroleum products.

An energy expert cited as a clear example of the country's vulnerability to global supply and price shocks the impact of the ongoing Russia-Ukraine crisis on our domestic petroleum prices.

Former Energy Secretary Al Cusi warned that the momentum of the fuel price surge will be hard to stop since even before the Russia-Ukraine conflict, the Organization of Petroleum Exporting Countries Plus was already confronted with a production shortfall.

The oil bloc refused to raise output despite pressure from the United States, Japan, China, India, and influential International Energy Agency members.

Setting up strategic reserves was Cusi's advocacy since it would address both the uncertainties on supply and provide a buffer against sudden price spikes.

Under the proposal, private oil companies and the state-owned Philippine National Oil Company would build a strategic petroleum reserve to pool resources to ensure supply is not disrupted.

PNOC would lead in maintaining the fuel reserve that would be more than the current 40-day average stock.

The program was modeled after similar petroleum reserves, or SPR, of developed nations such as Japan and the United States.

Several countries, including the United States, maintain a stockpile of crude oil to provide a buffer against disruptions in oil supplies.

The SPR is an emergency response tool to mitigate potential oil shortages due to natural disasters, geopolitical events, and other unforeseen circumstances.

The United States established its fuel reserve in 1975 following the Arab oil embargo of 1973-1974. The SPR is managed by the Office of Fossil Energy within the US Department of Energy. Underground storage facilities in salt caverns along the gulf coast of Texas and Louisiana are used.

Like the DoE proposal, the primary purpose of the SPR is to ensure the availability of crude oil during severe supply disruptions.

The reserve can be tapped into when significant disruptions in oil production, imports, or refining capabilities could lead to shortages and significant price increases.

Releasing oil from the SPR aims to stabilize the market and provide relief to consumers, industries, and the overall economy.

The US SPR has a capacity of approximately 713.5 million barrels of oil. Until September 2021, the US SPR held around 635 million barrels of crude oil.

The decision to release oil from the SPR rests with the US President, who can authorize such action in response to a severe supply disruption.

The release typically occurs in coordination with the International Energy Agency and after consultation with other major oil-consuming countries.

Aside from the US and Japan, Germany and South Korea also maintain strategic petroleum reserves to safeguard against oil supply disruptions and market volatility.

Saying that the local program should have received the government's support is crying over spilled milk.

The government, however, should consider having a buffer stock of fuel since the frequent price spikes have become a threat to the livelihood of Filipinos and thus endanger national security.