Mobil cautions against regulation of liquid fuel suppliers

Mobil Oil Mariana Islands Inc. has expressed “grave concern” over a House-passed bill seeking to subject liquid fuel distributors and retailers to the regulatory jurisdiction of the Commonwealth Public Utilities Commission, and asked that a thorough analysis be made to ensure that the measure will not be detrimental to the CNMI economy and its consumers.

Jaime Andres Ortega, president of Mobil Oil Mariana Islands Inc., said that Mobil does not have yet a defined position to support or oppose passage of House Bill 17-238, given the unavailability of detailed information regarding how the price regulations would be implemented and what elements would be considered.

But he said the passage of this bill in one single session at the House of Representatives “suggests to us that the extensive implications of such type of regulation may have not been given proper consideration yet.”

House Vice Speaker Felicidad Ogumoro’s (Cov-Saipan) bill is now with the Senate where it is has been tentatively assigned to the Public Utilities, Transportation and Communications Committee.

Senate Vice President Jude Hofschneider (R-Tinian) said yesterday that the Senate will have a meeting later this month with Mobil representatives to discuss the bill.

He said Shell Marianas, which will also be impacted by the bill if it is enacted into law, is welcome to participate in the meeting.

HB 17-238 says it is necessary to subject liquid fuel suppliers to regulation in order to protect the public from predatory pricing practices-the sale of a product or service at a very low price to drive competitors out of the market.

But Mobil’s Ortega said the actual price data for the fuel suppliers operating in the CNMI clearly demonstrates that there is no such phenomenon.

“Mobil believes that free and open markets that encourage competition and innovation are the best ways to ensuring that the consumer enjoys the lowest prices,” Ortega told Senate President Paul Manglona (Ind-Rota) and Hofschneider in a Dec. 23 letter, a copy of which was obtained only this week.

Mobil just increased its pump prices on Saipan on Thursday by 10 cents a gallon, driving the cost of regular unleaded gasoline to $4.809 a gallon.

Shell prices remained the same as of late yesterday afternoon.

Saipan’s gas prices, along with those on Rota and Tinian, are the highest in the United States and its territories.

Rep. Joseph Palacios (R-Saipan), one of those who voted “yes” to HB 17-238, said yesterday that regulating fuel suppliers is the way to go, adding that he does not believe Mobil and Shell will lose money just by being partly regulated to help protect consumers.

“Mobil for example has earned billions of dollars. Maybe it’s time for them to also give back to the communities they have operated in like Micronesia. In my opinion, they should work closely with the region’s governments to help consumers. We have high gas prices out here,” he said, adding that fuel supply will likely be discussed during the Association of Pacific Island Legislatures’ general assembly on Saipan in June.

Palacios authored a resolution last year asking Mobil and Shell to give a three-day advance notice every time they plan to increase their pump prices.

Mobil’s Ortega, meanwhile, said in his letter to senators that product pricing decisions are typically best made by companies themselves based on sound business principles and considerations of long-term viability.

“In regulated markets where price controls are externally imposed-and costs, margin requirements and other variables impacting the economics for the suppliers are not thoroughly and properly contemplated-companies often recur to forced efficiencies to generate reductions in operational expenses,” Ortega said.

He said this may result in measures such as labor force reductions, closure of non-profitable retail locations, reduction of operating hours, and deferral of investments required to ensuring supply reliability in the medium and long term. Ortega said that price regulations can create economic distortions and dampen investor sentiments, both of which are detrimental to the economy.

Hofschneider, for his part, said he himself has started studying the House bill and Mobil’s concerns.