"The closure has implications on our energy security."
The pandemic has brought the once-powerful oil industry to its knees. Plunging global economies have sharply reduced oil demand and made petroleum companies inconsequential in the changing marketplace.
Saudi Aramco, once the world's most valuable listed company, remains profitable but the company's income has fallen 73 percent in the second quarter. Oil giants Exxon Mobil and Chevron of the US registered hefty losses in the second quarter following the coronavirus pandemic. Exxon Mobil posted a loss of $1.1 billion in the second quarter, while Chevron lost $8.3 billion in the same period.
Anglo-Dutch energy major Royal Dutch Shell recorded a huge net loss of $18.1 billion for the second quarter on falling crude prices and reduced air travel. BP, Chevron, ExxonMobil, Royal Dutch Shell and Total reported combined losses of $53 billion for the second quarter.
Here in the Philippines, Pilipinas Shell Petroleum Corp. is calling it quits. The unit of Royal Dutch Shell is shutting down its oil refinery in Tabangao, Batangas province due to what it calls disruptive conditions created by COVID-19. Pilipinas Shell officials concede it is no longer viable to operate the refinery that started commercial operations in 1962.
Pilipinas Shell is now converting its refinery into a full import terminal as prices of imported petroleum products, such as gasoline and diesel, are either lower than or almost equal to the cost of refining crude oil.
Shell's decision to exit its Batangas operations leaves Petron Corp. the sole crude refiner in the Philippines. Caltex Philippines Inc., now Chevron, closed down its oil refinery in San Pascual, Batangas in 2003.
The closure of Pilipinas Shell's oil refinery was not totally unexpected. The company booked a net loss of P6.7 billion in the first six months of 2020 compared with a net profit of P3.7 billion in the same period last year.
The closure, however, has energy security implications on the Philippines. Oil prices fluctuate because of supply and demand, and for geopolitical reasons. Crude prices can easily surge as soon as the pandemic blows out. With a lone oil refinery operating, the Philippines will be largely left to the mercy of oil market speculators.