How the Oil Deregulation Law serves the few
In 1997, the Philippine government passed the Oil Deregulation Law (ODL)—an act promoting a free market competition among oil companies in the country as well as liberalization among downstream oil industries.
But through the years, because of undulating oil prices, much of the bill conjured more difficulties than comfort. To this day, the government remains deaf to the calls of the Filipinos for immediate relief.
Knowing the bill
Liberalization of the industry allows an entity to import or purchase oil products from foreign or domestic sources provided that their activities shall be recorded in accordance with the Department of Energy (DoE) for monitoring. On the one hand, a downstream oil industry is defined as a business “importing, exporting, re-exporting, shipping, transporting, processing, refining, storing, distributing, marketing and/or selling crude oil, gasoline, diesel, liquefied petroleum gas (LPG), kerosene, and other petroleum products’ stated in the 2nd Chapter of R.A. 8479.”
This bill talks about “ensuring a truly competitive market” that runs with fair prices. It also provides a suitable supply of environmentally-clean and high quality petroleum products. DoE was entrusted three-percent (%) tariff together with the Department of Trade and Industry (DTI) to monitor violations of “fair trade practice, and safety requirements or environmental laws.”
Petroleum products are those that are formulated by refinery through distillation, cracking, solvent refining and chemical treatment that are materials for Liquefied Petroleum Gas (LPG), gasolines, kerosenes, aviation fuels, diesel oils, fuel oils—products used for vehicles and households for cooking, printed in the first chapter of R.A. 8479.
The Philippines is not capable of maintaining these processes of producing petroleum products, we are fully dependent to the foreign market to supplement our petrol needs. Having this situation allows bigger companies to lead or take control over the smaller local market.
There is a good intention behind ODL. Small time businesses may venture into creating their own oil companies, because there is a fair share in decision making for prices to go up or down. The drawback is that the government will not be allowed to intervene with any of its market aspect, including oil pricing, import and export processes.
Despite the upright intension of the provision in stability of the economy and environment safety, ODL failed to meet its aims. Prices constantly increased just within the first 10 years of its implementation by more than 500%. An increase in oil product prices is common for the Public Utility Vehicles (PUV), but a regular increase is more of a burden for commuters that the transport sector needs to increase fare rates for them to meet their operational cost.
There is a pressing struggle forcing the marginalized to be more vigilant but not on the right timing. The Public Utility Vehicles’ (PUVs) alliance gathered as one to be heard. There were transport strikes organized by various transport groups that aims to go against nonstop gasoline and diesel price increases. Their call is to scrap the Oil Deregulation law since it has been overpricing without compromising with the rule that claims a fair pricing in oil products.
This triggered the PUVs to organize a national transport strike that caused disadvantages among commuters. Kilusang Mayo Uno (KMU) and Pinagkaisang Samahan ng Tsuper at Operator Nationwide (PiSTON) are two groups that often call a dialogue with companies of the leading oil companies in the industry and the government body regarding an end to ‘overpricing’.
KMU chair, Elmer Labog supported the scrapping of Oil Deregulation law and who also passed a request asking for a rollback in gasoline prices. He furthered that the government ‘should nationalize’ the oil industry, since Filipino workers has the most number of hard- earners.
Continuing the Pantawid Pasada Program (PPP) was an alternative and band-aid solution of the DoE to ease the burden of the transport sector. PUV drivers have to register to avail of the discount card. PPP is a financial support for the PUV drivers to cope up with the increases made by oil companies. The original fund is amounting to P300 million for PUV but Layug claimed that there was only P70 million alloted fund for it. Some Jeepney drivers failed to avail of this card for subsidy since the other half of it was meant to be spent on reloading the registered cards.
The Big Three
Petron Corporation, Pilipinas Shell Petroleum Corporation, and Chevron Philippines Inc. — are the so called ‘big three’ in the oil industry. Nothing beats the boss when it comes to deciding if the price would go up or down. Who would dare to question these three companies? They are the sole distributor and retailer in the small time oil companies who are trying to boom themselves.
These companies are said to be the only ones in control over oil distribution and fuel prices. Small- time oil companies are directly affected by changes made by these companies. Previously, a financial crisis rose within the wealthy nations that resulted to ‘instability in the international market’. This made them decide and increase their prices to recuperate their trade expenses but how long would the increase be implemented?
The Independent think-tank Ibon Foundation showed figures that in 1996, unleaded gas prices increased by 492 percent and diesel by 607 percent. In 2007 alone, Shell profited P4.12 billion, Chevron Philippines (Caltex) P2.75, and Petron got P5.95 billion. These are clearly ‘super- profits’ yet these three companies strongly claimed that they are under recovery saying they are badly needed to increase oil prices.
Further assessment of the ODL should have been further analyzed a long time ago. It was an obvious failure of implementing the law, allowing the entry of industry players and using ODL to abuse the consumers and ‘exercise a massive profiteering.’ Simply put, complaints weren’t given enough attention.
While on a dialogue, President Benigno “P- Noy” Aquino III asserted that he can’t support the PiSTON’s call on repealing the ODL. ‘Reviewing’ the law is the best thing he can do for this matter. P-Noy insisted the availability of alternative fuels, which they can use while diesel oil prices are increasing. They need to convert their vehicles and use LPG or Compressed Natural Gas (CNG) for it has cheaper value than diesel.
Transparency among competitors was questioned by the members of the transport group. P-Noy requested for members of the Philippine Institute of Petroleum (PIP) to open their books and disclose their financial statements on why these oil firms are allegedly overpricing. Commission on Audit (COA) was then assigned to monitor the price hikes as part of the task force of Department of Justice (DoJ) and DoE.
House Speaker Prospero Nograles expressed his support on amending the provision of the oil deregulation law. However, he disagreed on repealing it. He said that oil companies may increase prices but it should be reflective of the ‘trend in the world market prices.’ Scrapping the law would mean an additional government subsidy—the Oil Price Stabilization Fund (OPSF) –where tax payers would pay an increase to keep low prices of oil.
Congressional Planning and Budget Department (CPBD) of the House of Representatives director General Rodolfo Vicerra supported Nograles’ argument. Before the deregulation, there was a government subsidy of P8.3 billion. Therefore, taxpayers need to fund OPSF for our country to be free from debt and insufficiencies. There were even estimated P31 billion losses in revenues as stated by the Philippine Institute of Petroleum (PIP) due to oil smugglers.
Irregularities are signs of the government’s failure in implementing any of its laws. They drafted and signed petitions on lobbied materials but failed to review every bit of its details.
Several transport sectors strengthened their demand that reviews and assessment of ODL must have ‘well- defined objectives and be open to public.’ Consumers are the ones who are affected and therefore they should know how the ODL is being run. Various sectors need to uphold their rights and have their opinion considered.
Abolishing the ODL might take a long walk of jurisdiction. Staying in line with a stable market seems tough and impossible for the small time oil companies and for the local consumers who’s only after meeting their basic needs. Several transport strikes and dialogues with the authorities had been made, but it seemed no chances of abolishing or at least rehashing the law. But it’s never a reason to stop reviewing the ODL.
P- Noy never failed to have dialogues with the transport groups that were eager to work on their needs. Transport strikes were successful; it was obviously heard over our television screens. But we don’t see improvements; P- Noy gave zero results. The next days slapped the consumers another increase. Oil deregulation law? It’s more fun in the Philippines.
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