Legarda seeks permanent fuel-security framework

MANILA, Philippines — Sen. Loren Legarda is pushing for a permanent fuel-security framework that would allow the government to closely monitor the fuel market and act quickly when prices and supply are threatened by a crisis.

Legarda filed Senate Bill No. 2435, or the proposed Philippine Fuel Security and Strategic Petroleum Reserve Act, on Sept. 1. The measure would strengthen regular monitoring and verification while giving the government temporary powers during a declared fuel emergency.

The proposal follows issues raised during the recent oil crisis and Senate PROTECT Committee hearings involving fuel inventories, actual acquisition costs, industry margins and the basis for price adjustments.

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“During the hearings, we saw how quickly prices could rise, while the government and the public had limited information on the actual cost of fuel already in the country, existing inventories, industry margins and the basis for each adjustment,” Legarda said.

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“Families felt the increase immediately, but many basic questions could not be answered with the same speed,” she added.

Oil companies explained during the hearings that pump prices may be based on replacement cost, or the expected cost of the next shipment, even when fuel being sold had been acquired earlier at a lower price.

The government, however, did not always have ready access to records needed to independently verify the costs and margins involved.

“We are not saying that companies should not earn. But when there is a crisis and prices are rising quickly, the government should be able to determine whether the increase is reasonable or whether someone is profiting excessively while families are tightening their belts,” Legarda said.

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“No one should take unfair advantage during a crisis,” she added.

Under the bill, the Department of Energy (DOE) would continuously monitor fuel supply, inventories, acquisition and landed costs, price movements, distribution and market behavior.

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When verification is needed, the DOE may require contracts, invoices, bills of lading, import entries and documents covering freight, insurance, storage and hauling costs.

The authority would apply even without a declared emergency but would be limited to monitoring, verification, planning, consumer protection and enforcement.

The bill states that this would not amount to ordinary price control, while commercially sensitive information would have to remain confidential.

“Monitoring is different from regulating. During normal times, the DOE needs to know the true state of supply, costs and prices,” Legarda said.

“When a crisis comes, only then may clear, limited and temporary powers be used to protect the public,” she added.

During a declared fuel emergency, the DOE may impose temporary pricing and supply measures, including price or margin limits, priority allocation for essential services, inventory requirements, distribution directives and emergency procurement.

The agency may also limit, adjust, suspend or require verification of replacement-cost pricing when its continued use is likely to result in premature price increases, delayed rollbacks, excessive margins or market abuse.

An emergency pricing method may instead consider actual acquisition cost, average inventory cost, landed cost, reasonable logistics expenses and reasonable margins.

The measure also seeks to address questions raised during the hearings over additional government revenues when higher fuel prices increase value-added tax and other fuel-related collections.

It would require the publication of a Fuel Tax Transparency Report comparing actual collections with official revenue assumptions.

“As prices rise and families can afford less, it should also be clear how much additional revenue the government is collecting,” Legarda said.

“The public deserves to know whether the government is receiving windfall collections from the same crisis that is causing them hardship,” she added.

If substantial additional or windfall collections are identified, the Department of Finance and the Department of Budget and Management would be required to recommend appropriate relief.

Possible measures include temporary fuel-tax reductions, public transport support, assistance for farmers and fisherfolk, food logistics or disaster response.

The bill would also create a Strategic Petroleum Reserve for major national supply disruptions and a Government Operational Fuel Reserve to keep essential services running.

The DOE would lead the program, while the Philippine National Oil Co. would serve as the state’s fuel-security agent.

“We should not repeat in the next crisis the same search for data, disputes over the basis of prices and scramble for separate responses,” Legarda said.

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“We have seen where the gaps lie. This bill puts the information, safeguards, emergency powers, tax accountability and fuel reserves into one permanent system,” she added.