As Congress intensifies its probe into the country’s ongoing energy crisis, lawmakers were informed that recent fuel price increases were implemented immediately — even for existing lower-cost inventory — due to the oil industry’s use of the replacement cost pricing mechanism, which ensures the ability to restock supplies at current market prices.
The matter was discussed during Monday’s continuation of the Legislative Energy Action and Development (LEAD) Joint Committee briefings, where executive agencies and industry stakeholders presented updates on measures to address rising energy costs.
Financing mechanisms
In response, Murang Kuryente Partylist Rep. Arthur Yap proposed the establishment of financing mechanisms through government financial institutions to help mitigate sudden price surges and ease the burden on consumers.
Yap suggests that state-run banks, such as the Land Bank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP), extend long-term loan facilities to oil companies to allow industry players to spread out fuel procurement costs over a longer period, reducing the need to immediately pass on sharp price increases to consumers.
“Sa issue ng replacement cost for purchase of fuel supplies, hindi kaya pwedeng ang LandBank at ang DBP maghanda ng pondo para mapagamit sa mga oil companies in the concept of a long-term loan? Hindi naman kailangan na pondo lang nila — maaaring syndicated loan from the banking sector. Long-term loan po. Hilahin ng 10 years ang special loan para ma-absorb yung price shock at hindi na ipataw sa taong bayan. Commercial solution po ito. Hindi po ito subsidy or grant (Regarding the issue of replacement cost for the purchase of fuel supplies, is it possible that LandBank and DBP prepare a fund for long-term loan use by oil companies? It doesn’t need to be their funds only, it could be a syndicated loan from the banking sector; let it please be a special long-term loan that can be stretched to 10 years to absorb the oil price shock that shouldn’t be imposed on the public. This is a commercial solution, not a subsidy or grant),” Yap said.
Ongoing debates
The proposal comes amid ongoing debates on the limits of government subsidies and financial assistance programs, which some analysts argue are not sustainable responses to volatile global fuel prices.
Yap emphasized that his recommendation is not a subsidy, but a market-based solution that leverages the banking system to stabilize fuel prices while maintaining fiscal discipline.
The concept aligns with similar proposals from energy sector stakeholders, including analyst Guido Delgado, who suggested that a financing facility led by DBP and LandBank — potentially syndicated with private banks — could directly support fuel purchases and spread costs over time.
Costs could amortized over a longer horizon
Under such a model, costs could be amortized over a longer horizon, potentially reducing the immediate impact on consumers.