Petron to incur P1.5 billion in losses from fuel price cap

A government order putting a price cap on fuel will prompt Petron Corp., the Philippines’ largest oil company, to incur P1.5 billion losses for the last quarter. The figure is more than half of its P2.32 billion income for the first half this year. Executive Order 839, which directs oil companies to bring prices back to October 15 levels, will bring “a net loss of P1.5 billion in the fourth quarter of 2009," the company said in a disclosure to the Philippine Stock Exchange (PSE). Losses will be incurred as it starts to pay higher prices for its crude oil inventories for November and December, Petron said. To comply the fuel price cap, the company cut P1.25 per liter off from its premium gasoline prices, 85 centavos off its regular gasoline, and P2 off its diesel costs. As of six in the morning on Tuesday, October 27, the company also reduced kerosene prices by P1.50 per liter, reflecting October 15 prices. The company said it already reported losses worth P3.9 billion last year and is only starting to recover. Petron also said it may be unable to cover the supply shortfall in case other companies decide to stop the sale of its fuel products. At the same time, Petron sought clarification of the price cap, since the presidential order fails to indicate the products, areas, and the time covered. “We seek a clarificatory supplement to EO 839," the company said, adding that fuel retailers in Luzon are already engaged in a price war. In Metro Manila, diesel prices are already five pesos lower than standard retail prices. “There should be a sharing of the burden (e.g. government can lower tariffs to mitigate losses that will be incurred)," the company said. For the past five years, the company also invested more than $400 million at its Bataan Refinery, allowing it to produce fuel that will comply with Clean Air Act standards. Other investments also enabled Petron to manufacture petrochemical feedstocks. The company runs the Philippines’ oil refinery with a capacity of 180,000 barrels per day. Besides supplying 40 percent of the country’s fuel requirements, it also has 1,300 service stations nationwide. - GMANews.TV