Alternative to Oil Deregulation

The deregulation of the oil industry failed to deliver on its much-hyped promise in the mid-1990s to bring down oil prices supposedly by introducing competition. With oil prices rising to unprecedented levels recently, consumer groups and other cause-oriented organizations should be expected to reiterate and intensify their long-standing call for the nationalization of the oil industry as the alternative to deregulation.

BY ALEXANDER MARTIN REMOLLINO
Bulatlat

"Oil deregulation has caused nothing but hardship for the Filipino people," said Anakpawis (Toiling Masses) Rep. Crispin Beltran, HB 1065's principal author.

Cartel

The explanatory note for HB 1065 points out that contrary to its promise of lowering oil prices by introducing greater competition, oil deregulation did not dismantle the monopoly of the Big 3. "They continue to dominate the playing field," Beltran said in Bulatlat phone interview Aug. 21.

The deregulation of the Philippine oil industry did bring in a number of new players, but it has not stopped the Big 3 from acting like a cartel. Deregulation removed all barriers to arbitrary pricing.

In a recent report IBON Foundation, oil companies overpriced their products by P0.91 ($0.01625) per liter from December 2002 to December 2003. This fetched them P1.1 billion ($19.64 million) in extra profits.

From January to May this year alone, oil companies were found to have overpriced their products by P0.16 ($0.0029) per liter, in the process garnering extra profits amounting to P216 million ($3.86 million) for the period. Which means that there was no reason for them to hike oil prices even as there has been an uptrend in world oil prices.

IBON data further reveal that there were 58 oil price hikes initiated by the Big Three from April 1996 to January 2004 (or 63 as of this week). The average retail prices of petroleum products went up by 224 percent during the period.

Because of this, socially-sensitive petroleum products such as liquefied petroleum gas (LPG), diesel, and kerosene became less affordable for those in the lower-income brackets. From April 1996 to January 2004, LPG prices soared by 116 percent, diesel prices by 170 percent, and kerosene prices by 169 percent.

But overpricing of oil products is not the sole problem of Filipino consumers. As IBON senior researcher Arnold Padilla noted in an article for IBON Features last March, “Even without overpricing, consumers may still be paying more than what they should.”

“Petron, Shell, and Caltex do not only own refilling stations” he further noted. “The global monopolies that control them also own exploration companies, vast oil fields, hundreds of kilometers of oil pipelines, fleets of oil tankers, large refineries, etc.”

Padilla disclosed that as of December 2003, the Big 3 controlled 80 percent of the country’s refilling stations. Out of the 3,782 refilling stations nationwide as of December last year, Petron owned 1,188; Shell, 1,083; and Caltex, 940.

Aside from that, Padilla wrote, the Big 3 accounted for 90 percent of oil products used as of September that same year.

“Such monopoly control allows these oil companies to rig the true costs of their products,” Padilla pointed out.

The broad-based consumer group Kontra Kartel (Anti-Cartel) explains the persistence of the Big 3 Monopoly thus: “The control of Petron, Shell and Caltex on the downstream oil industry persists because deregulation has only given them much leeway 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

With oil prices rising to unprecedented levels recently, consumer groups and other cause-oriented organizations should be expected to reiterate and intensify their long-standing call for the nationalization of the oil industry. Kontra Kartel, in a statement last June, outlined the goal of oil industry nationalization as follows:

“Unlike 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. Market forces should not be the only determinants of pump prices, for the need to make prices as affordable as possible to consumers should be more important. Socially sensitive products like diesel, LPG and kerosene must be given more priority and thus subsidized to ensure lower prices.

“Nationalization can 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. It becomes feasible therefore to institute cross-subsidies, such that the pump prices of socially sensitive products like diesel, kerosene and LPG are subsidized.”

For his part, Beltran has this to say about nationalizing the oil industry: "The government itself says it is helpless in dealing with endless oil price hikes under a deregulated atmosphere. The people are bearing the brunt of these oil companies' profiteering. The nationalization of the oil industry is thus the logical option." Bulatlat

Back to top

We want to know what you think of this article.