A re-entry of state-run Philippine National Oil Company (PNOC) into oil marketing and trading has been proposed, so that government can position itself as the “price leader” that can offer cheaper petroleum products not just to public utility vehicle (PUV) drivers but even to the wider constituency of commercial and industrial end-users.

PNOC Board Director and former Energy Regulatory Board (ERB) Chairman Rex Tantiongco recommended that government-run firm’s renewed foray in the industry shall be done through a tolling arrangement with Petron Corporation, the country’s lone refiner.

He explained that with PNOC joining the bandwagon of players in the deregulated downstream oil industry, a government-to-government (G-to-G) deal on the purchase of crude commodities can be explored with oil producer-countries at a discounted price, similar to the ‘oil diplomacy strategy’ that the Marcos administration had pursued in the 1970s to 1980s.

With that strategic mode of crude procurement that will be subsequently processed at the Petron refinery, he asserted that PNOC will have leeway to sell petroleum products at lower prices, without necessarily resorting to predatory pricing (below-market pricing).

Tantiongco emphasized that the business of PNOC or its subsidiary PNOC-Exploration Corporation has to be expanded “by entering into consignment/marketing, and tolling/ business agreement with the privately owned refinery in the country, and oil company that has a comparatively wider distribution and marketing facilities nationwide.”

The ideal partner for PNOC, he said, will be Petron because the government-owned firm already has 62 gasoline stations and 27 depots that are in lease arrangement with the country’s biggest oil company.

Tantiongco indicated if this venture for PNOC will be concretized, the income it will generate can be funneled as subsidy to the PUV drivers and other critical sectors, such as in agriculture - primarily when there are radical spikes in prices at the pumps – that way, the tax collections of the national government can already be realigned to other highly-needed expenditures, such as in the infrastructure build-up for the country.

The state-run firm, he underscored, can “sell petroleum products to the transport sector, such as, jeepneys, buses, taxis, and grab cars, at a calibrated amount of cash rebates – or ayuda (subsidy) to targeted consumers of diesel, gasoline and liquefied petroleum gas (LPG) without indulging to predatory pricing.”

In extending subsidies through ‘privilege cards’ to the PUV drivers, he similarly propounded that the relevant government agencies would also be able to enforce discipline, such that “this privilege is limited to franchise holders, thus, should be properly coordinated with the DOTr (Department of Transportation) and the LTFRB (Land Transportation Franchising and Regulatory Board).”

The PNOC official added “privilege cards are to be issued to qualified drivers. The adjustable cash rebates can be availed of by the drivers upon gas purchase,” with him qualifying that “this scheme is easy to administer, less red tape, and can minimize, if not eliminate, corruption, since it would benefit only the daily gas consumptions of the legitimate PUV drivers directly, not passing through channels.”

Apart from selling petroleum products commercially to end-users, Tantiongco noted that PNOC can also corner government entities as its captive market.

He said the state-run company can “supply, at prevailing market prices, the petroleum products requirements (including lubricants, tires and batteries) of all government entities, both national and local.”

Tantiongco further pointed out “this mandatory sales to captive market was already practiced in the past, through COA (Commission on Audit) Administrative Order, when Petron was still owned by the government. The practice ended only when Petron was totally privatized.”