Mobil exec: Bill will lead to govt ‘micromanaging’ oil firms

Mobil Oil Mariana Islands Inc. president Jaime Andres Ortega said yesterday that a bill that would subject liquid fuel distributors and retailers under the regulatory jurisdiction of the Public Utilities Commission is detrimental not only to Mobil but also to the entire CNMI economy.

Ortega, a guest speaker at yesterday’s Saipan Chamber of Commerce meeting, said that House Bill 17-238 pretty much tries to “micromanage” fuel suppliers and retailers.

“Regulations do not necessarily lead to price reductions,” Ortega told Chamber members and guests at Saipan Grand Hotel in Susupe.

He said Hawaii tried this but, instead of driving fuel prices down, shot them up.

HB 17-238, authored by House Vice Speaker Felicidad Ogumoro (Cov-Saipan), passed the House at a Dec. 6 session, less than a month after being introduced on Nov. 10.

The bill’s swift passage at the House suggests that the implications of this type of regulation may have not been given proper consideration, Ortega said.

Senate Vice President Jude Hofschneider (R-Tinian) said the Senate Committee on Public Utilities, Transportation and Communications is still reviewing the bill.

“Based on research we have done, the areas within the U.S. that have applied the same, it backfired on them. But the committee has not made a final decision yet whether to recommend passage or defeat,” Hofschneider said.

Ortega said that “no amount of government intervention will help overcome the market forces driving the price of fuel.”

Fuel prices

Ortega’s presentation also touched on the factors that affect pump prices in the CNMI.

Of the three factors, the largest is the price of crude oil, followed by the manufacturing, transportation, marketing and other costs. The last factor is taxes.

All these factors are also affected by a host of elements. Crude oil, for example, has prices that depend on market forces (supply and demand), and driven by producing countries’ income needs and economic growth, energy need and global inventories, among other things.

In the CNMI, there are several factors considered whether to adjust prices. These include changes in product price costs, supply and transportation costs, terminal costs, trucking costs, other onsite costs, reference internal price margin targets, and competitors’ pump prices. The CNMI is a remote location and has a very small consumer base, and the cost of bringing in fuel is high.

In an interview with reporters later, Ortega said the question of how fast or slow Mobil determines its pump price from the time it leaves the refinery to the time it is brought to the service station is “not that easy to respond to.” Fuel is not easily priced as any other consumer goods.

He said Mobil plans its supplies based on inventory and projected demand to make sure there’s always fuel available.

When asked repeatedly why Mobil and Shell always have the same price and price changes, Ortega said, “We decide what the price of our fuel should be based on these elements I mentioned.I cannot comment about how the competition prices their fuels.”

Jim Arenovski, president of Delta Management Corp. which operates four Shell service stations on Saipan, said Ortega’s presentation was “very accurate” on the factors that affect prices and supply chain.

Pump prices on Saipan, Tinian and Rota are the highest among all U.S. states and territories. On Saipan, regular unleaded gasoline is $5.159 a gallon. On Rota, regular unleaded gasoline is $6.10 a gallon and diesel, $6.90 a gallon.