Bu-lat-lat (boo-lat-lat) verb: to search, probe, investigate, inquire; to unearth facts
Volume IV, Number 20 June 20 - 26, 2004 Quezon City, Philippines
the age of globalization, nationalization is seen as anathema to
“development.” However, the current spate of oil price hikes warrants a
re-examination of the concept of nationalization of the downstream oil industry
to ensure affordability and accessibility of a very important product.
DANILO ARAÑA ARAO
spate of oil price hikes can still be reversed, if only the administration will
heed the call to enact policies that will ensure the affordability and
accessibility of petroleum products.
to the Department of Energy (DoE), the government is “steadfast in its
position of…giving deregulation a chance, thereby letting market forces
determine the fate of the (downstream oil) industry. Indeed, prices are higher
than it was prior to deregulation, but considering present conditions it is fair
and actually lower than is expected under a regulated environment.”
implies that government is expected not to do anything to control prices of
petroleum products, in the hope that a rollback will happen once international
crude prices go down.
Spokesperson Ignacio Bunye stressed that right now, “dialogue, discipline,
solidarity and sacrifice are needed so that common solutions can be found
involving the broadest range of affected sectors.”
it is, government officials even stress that the public should be thankful that
oil industry is now deregulated, since the consumers have more choices as to
where to buy their petroleum products.
arguments have been going on since 1996, and it is necessary at this point to
review the events related to the deregulation of the downstream oil industry.
deregulation of the downstream oil industry started in April 1996 through
Republic Act (RA) No. 8180. However, the Supreme Court (SC) declared this law
unconstitutional in November 1997. According to the SC justices, there were
provisions that failed to promote free competition, such as the minimum
inventory requirement for oil companies and the higher tariff on imported
refined petroleum products (7 percent ad valorem tax) compared to
imported crude oil (4 percent).
high court likewise denounced the existence of a foreign oligopoly despite the
entry of new industry players that belonged only to the “Lilliputian”
February 1998, the Ramos administration approved RA 8479, the second law on
downstream oil deregulation. An attempt was made to ask the SC again to nullify
the law on the ground that there was only five-month transition period to full
deregulation. This time, however, the SC dismissed the petition in December
1999, saying that the issue of oil deregulation is beyond its jurisdiction,
to the government, deregulation is necessary to depoliticize the pricing of
petroleum products. Officials argue that the public must be acclimatized to
frequent oil price changes based on the foreign exchange rate and world crude
them, competition among the oil companies will result in lower prices and better
services. In the final analysis, the consumer will reportedly benefit due to
arguments for nationalization must be considered at this point when prices of
petroleum products continue to increase, and as government officials claim that
they cannot do anything to control the prices.
in a deregulated atmosphere, a nationalized regime undertakes price control
which can minimize the impact of sudden price increases brought about by the
peso devaluation and fluctuations in the prices of imported crude oil.
the process, the domino effect of sudden price increases would be prevented.
According to the government, results of its study show that the five
heavily-affected sectors are products of petroleum and coal, food manufactures,
land transport, trade, and electricity and water.
forces should not be the only determinants of pump prices, for the need to make
prices as affordable as possible to consumers is more important.
Socially-sensitive products like diesel, LPG and kerosene should be given more
priority and thus subsidized to ensure lower prices.
a deregulated atmosphere, the pump prices are “depoliticized,” which means
that the prices of socially sensitive products like LPG, diesel and kerosene are
now left in the hands of transnational corporations.
is said to correct this set-up by reversing the “depoliticized” price
setting and having instead a regulated pricing mechanism. The latter takes
cognizance of the need to make petroleum products affordable.
becomes feasible therefore to institute cross-subsidies, such that the pump
prices of socially-sensitive products like diesel, kerosene and LPG are
subsidized. On the other hand, those which are mainly consumed by the rich like
premium gasoline are pegged at prices which would have a higher mark-up.
regards ensuring the oil supply particularly in remote areas, the experience
with oil deregulation shows that the entry of new industry players does not
automatically assure accessibility of petroleum products particularly in rural
areas. Indeed, the increase in number of industry players did not result in
gasoline retail outlets being distributed nationwide.
does not come as a surprise, since according to an IBON study in 1997 “profit
orientation dictates that they invest in areas with higher returns on
investment. For the new industry players, a developed area would mean bigger
profit margins due to high demand for petroleum products. It also means less
operating costs as they avail of better infrastructure.”
control of Petron, Shell and Caltex on the downstream oil industry persists
because deregulation has only given them greater magnitude in engaging in
unscrupulous practices like price fixing. They are wont to do this since the
downstream oil industry has a captive audience given the constant demand for oil
in the absence of viable alternative sources of energy. It has been argued that
the downstream oil industry provides opportunities for more and more profits as
the population increases and industrial expansion happens.
nationalization, strict government regulation changes the profit-oriented
character of the industry into one that is essentially service-oriented.
Unscrupulous practices are checked since the “free-for-all” characteristic
of a deregulated regime is eradicated.
from that, the downstream oil industry gets integrated to the thrust toward
economic development. State control would enable the industry to respond to the
power and energy demand of the economy and the people.
Nationalization, indeed, is not just a temporary fix to the problem of oil price hikes, but an urgent, absolute necessity to rectify the mistake of deregulating the downstream oil industry. Bulatlat.com