MANILA, October 20, 2004 (STAR) By Donnabelle L. Gatdula and Des Ferriols - The Department of Energy (DOE) warned yesterday of a continued rise in domestic oil prices for the remainder of the year due to the unabated increase in global oil prices.

Government sources said the situation has also prompted the Arroyo administration to discuss the possibility that it may have to step in and undertake critical power generation projects to avert a looming power crisis.

"Prices have continued their relentless march higher and are expected to be on an upward trend until the end of the year with the coming of winter season in the Northern Hemisphere. We have to brace ourselves," Energy Secretary Vincent S. Perez said yesterday.

The price of oil spiked to a new record high of $55.22 a barrel in Asia on Monday, after having lingered above the $55 level in New York on Friday as concerns about US heating fuel supplies mounted ahead of winter in the northern hemisphere.

With the continued rise in global oil prices, reports of recent Cabinet meetings showed that government officials have started contingency planning in case private investments in the energy sector would not be enough.

Documents showed that during a recent Cabinet meeting that discussed the Medium Term Development Plan for 2004 to 2010, the DOE has been instructed to determine the "trigger date" when the government would have to step in to build power plants.

The DOE, according to the report, was a also instructed by the Cabinet to review the proposed legislation on renewable energy sources since these were expensive and require heavy upfront expenses.

Perez, meanwhile, said the tightening of diesel stocks in the US and Europe have kept local prices on the rise.

"Disruptions in production such as the just-concluded oil workersí strike and threats of rebel attacks in Nigerian oil facilities, production losses in the Gulf of Mexico brought by the several hurricanes that passed in the area, continuing violence in Iraq and the ongoing legal and financial problems of one of Russiaís largest oil company Yukos have also pushed prices higher," Perez said.

The energy chief, however, stressed that with the prevailing high oil prices in the market, the DOE will strictly monitor the activities in the industry as he warned oil companies not to take advantage of the situation.

Consumer advocate Raul T. Concepcion, for his part, said that comparing the price as of Oct. 15 to the September average, Dubai crude increased by $2.15; MOPS (Mean of Platts Singapore) gasoline increased by $5.78; and diesel by $3.10.

Concepcion said oil refiners Petron Corp. and Pilipinas Shell Petroleum Corp. as well as the new players have already responded to their groupís monthly detailed computation from the start of the year and that he will be meeting them individually within the week to thresh out the computations.

"We are therefore appealing to Shell and Petron not to increase prices, if any, until we conclude our discussions early this week,"Concepcion said.

However, in the case of players like Caltex Philippines Inc. and Total Philippines Inc. which import all their diesel and gasoline requirements, Concepcion said "we will not object if they increase their price of diesel as they have an under recovery of P1.71 which they have not recovered in September."

"In informal discussions with the oil refiners and new players, there seems to be an agreement on the need to shift from the previous month-end average to the current month average, to arrive at the price changes for the (next) month due to the volatility of the world market prices,"Concepcion said.

Concepcion said that according to the oil companies, the present method contributes to the publicís negative perception that when prices are moving upwards, oil firms are quick in increasing their prices but when world market prices move downward, they are slow in reducing their oil prices.

The industrialist said that they will also discuss the merits of shifting to a weekly moving four weeks average, which means weekly oil price adjustments.

DOE monitoring shows that the price of Dubai crude went up to $37.69 per barrel on the average in October, from $35.55 in September, while MOPS-based unleaded gasoline used by importers hit $54.88 per barrel in October, compared to $49.04 per barrel in September.

MOPS-based diesel also rose by $3.31 to $57.60 per barrel average in October, from $54.29 in September.

The contract price for socially-sensitive liquefied petroleum gas (LPG) have likewise risen to an average of $401.50 per metric ton (MT) in October compared to $383 MT average in September.

Reported by: Sol Jose Vanzi

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