Cheaper oil prompts DOE to review ‘fuel mix policy’

by Myrna Velasco, February 7, 2015
from Manila Bulletin

The slump in oil prices – which is also very much tied to the glut in gas supply in North America – has prompted the Department of Energy (DOE) to further review the proposed “fuel mix policy” for the country.

Energy Undersecretary Zenaida Y. Monsada, in an interview, noted that the picture for higher share of gas in the power mix should have been desirable if prices will only stay at considerably cheap or even steady level.

However, she stressed that the “ending” of the current fall in prices may eventually jolt energy markets with even higher prices.

Monsada

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She said that when they were doing preliminary number-crunching on the impact of new gas-fed power facilities on electricity consumers, they deemed that $17 to $19 per million British thermal unit (BTU) gas may still turn out expensive for Filipino ratepayers.

But she stressed that there was a point when they were seeing gas prices for Asian markets getting more affordable at $12 per MMBTU, and that was supposedly then a good anchor for them to seriously consider crafting a fuel mix policy with gas integration in the technology options.

The energy official said “we need to review the impact of the current developments in the energy markets – especially on the price of gas. Our concern is not actually what we have right now, but what will be that price, say in the next 7 years to year 2030.”

She added that the proposed 30-percent share of gas in the mix is also being weighed – not just on the sphere of cost impacts but in the overall needs and preference for capacity additions in the power grids.

Monsada noted that if one has to look at the cyclical movements in energy prices in the past – when investments would stall at some point, the next episode will always be price up-ticks.

In gas markets, capital outlay and investments in major gas production and developments globally are currently being delayed or stymied because of the rock bottom prices.

With impeded flow of additional production though, markets will eventually suffer from supply tightness which will then spark off fresh round of spikes in prices.

 

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