As this pandemic rages, all types of businesses have been greatly affected and regardless of whether you are in a Third World or a developed country, there is no way that you are spared by this global health crisis that has paralyzed all economic activity. Much of the world’s population have been forced to either stay inside their homes or are confined in isolation waiting out the quarantine lockdowns. As mobility or transportation has been on standstill, the resulting low demand for fuel has plunged prices for gasoline and oil products to historic lows with deleterious effects on Philippine oil companies and gasoline station owners alike. This unexpected shift has caught everyone by surprise and I reached out to Unioil Petroleum Philippines President Kenneth C. Pundanera (KCP) to ask how the oil sector is faring amid this crisis.
With world oil prices at record lows, what is the prospect for the oil/fuels industry right now?
KCP: The current oil prices have a negative effect more on crude oil producers as well as refiners. Very low crude oil prices make crude oil extraction not viable especially for the newer wells. This can be seen especially in countries like the US where the cost of extracting oil from shale is much more expensive than countries in the Middle East. The current oil wells actively producing in the US have declined to a 3-year low due to the decline in prices. Refiners too are very much affected by low prices. The crash in demand has led to some products like gasoline having very low to negative refining earnings.
The transportation industry is at a standstill; what is the impact of this pandemic lockdown to your company? How are you maintaining the business?
KCP: Volumes are down. Public transport comprises a significant portion of total local consumption of petroleum products. Moreover, we have to balance the safety of our people and the need to be able to continue providing our products to those who need it. We are operating from home and our plants and stations are operating at reduced hours.
How do you see this pandemic impacting the Philippine oil industry? What suggestions would you have for the government to provide support to the sector, especially, its workers?
KCP: The demand for petroleum products is very much related to economic activity. A recovery in demand will only begin when the ECQ is fully lifted but full recovery to levels prior to the ECQ will take much longer due to the long-term impact of the damage of COVID 19 to the economy. Also, the best support for the sector and its personnel is to allow unimpeded movement for our essential staff and products. Although this is covered by the instructions from the IATF, the implementation of the policy differs from one location to another which leads to a lot of confusion and delay in services.
A friend of mine, who asked not to be named, is a gasoline station owner in Mindanao shares that people in a similar line of business have been heavily impacted. “Everybody has taken a hit on volume since only a limited number of vehicles are out on the roads.” For small businessmen like him, he requests for support from the DTI and/or relevant government agencies by way of rent-free months during these times when businesses are not allowed to operate, as well as no interest increase or interest-free payments for business/ cash loans charged by the banks. He disclosed that his business was badly affected with sales volume down by 50% since the start of the ECQ in his province.
One of those who is also strongly appealing for tax relief to help small and medium businesses in these times of the pandemic is Mon Abrea, Founder and Chairman of ACG Consulting, also known as the Tax Whiz who, in a study on how to help alleviate the plight of the SMEs came up with a “tax bucket list” to alleviate the suffering of Pinoy entrepreneurs. Some of these measures include: a general tax amnesty; tax holiday from business taxes which should eventually transition into a flat tax; lower corporate rate of 20 percent; economic tax relief covering all employees and tax rebate for small business owners who paid their employees’ salaries during the ECQ period.
According to Mon, “small businesses have zero or no income, but they still have to pay for salaries, rent, phone bills, internet and other fixed costs.” While there is the grace period granted by the Bayanihan Act, he posits that payments may have been deferred but where will the entrepreneurs get cash to pay their accumulated bills when the ECQ is lifted?
In the spirit of true “bayanihan”, we are one with our national leadership in the need to flatten the curve of the virus spread through ECQ but we also feel that the government should be more supportive of SMEs which comprise the bulk of the national economy. Like all businessmen, Mr. Pundanera of Unioil believes that the country’s economy should be revived as soon as possible but this could only be done if we have the mass testing for the virus that can be instituted throughout the country to improve the monitoring and control of this pandemic. Hopefully, as our local and national authorities respond to our pleas, then we can already begin our road to recovery.
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