Loan facility pushed to ease fuel costs
Fuel companies currently follow a ‘replacement cost’ scheme, where retail prices reflect the expected cost of replenishing inventory based on recent global price movements.
Fuel companies currently follow a ‘replacement cost’ scheme, where retail prices reflect the expected cost of replenishing inventory based on recent global price movements.
A proposed government loan facility for oil firms is emerging as an alternative to price controls, as lawmakers seek ways to cushion the impact of rising fuel prices on consumers.
Lawmaker Miro Quimbo, Chair of the House Committee on Ways and Means, said extending credit support to petroleum retailers could address liquidity constraints tied to the industry’s pricing system, without disrupting supply.
Fuel companies currently follow a “replacement cost” scheme, where retail prices reflect the expected cost of replenishing inventory based on recent global price movements.
While this helps firms manage supply, Quimbo noted it can result in higher pump prices even when existing stock was purchased at lower costs.
Instead of imposing price controls, which he warned could discourage firms from restocking, the lawmaker proposed targeted financial support.
“This is where the government can step in, since this is a liquidity issue. Our suggestion there is that since it can go down next month, why not first lend to the gas companies at a reasonable rate, interest rate, so they can make purchases,” Quimbo said.
He added that such a mechanism allows firms to maintain supply while easing immediate pricing pressures, with the expectation that loans can be repaid once prices stabilize.
“Because when it comes down to it, we will be paid immediately next month because they are earning,” he said.
The proposal comes as global oil volatility — linked to tensions in the Middle East — continues to affect domestic fuel prices. Quimbo said lawmakers are balancing short-term relief measures with longer-term reforms to reduce exposure to external shocks.
He also raised concerns over possible “cartel-like” behavior in weekly price adjustments, noting that oil firms will be invited to explain their pricing mechanisms in an upcoming congressional inquiry.
Legislators are now preparing a package of measures addressing both immediate cost pressures and structural issues in the energy sector, with discussions expected to resume when Congress reconvenes in May.
Reacting to this, Energy Secretary Sharon Garin, in a radio interview on Sunday, said the suggestion is feasible so long that the government has a budget for it.
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