While a buffer fund will be needed in a regime of regulated oil prices, such fund is entirely different from the flawed OPSF. It must be emphasized that it is possible to establish a buffer fund without passing on the burden to taxpayers and consumers. One way of doing it is for the buffer fund to be financed by government earnings and savings from its increased participation in a regulated downstream oil industry.
Under this proposal, the government will become the exclusive importer of crude oil and petroleum products. As such, the country can expand potential oil sources and shop for the cheapest available oil. Bilateral agreements with state-owned companies from oil exporting countries may be pursued under special arrangements, including commodity swaps, which can provide the country considerable discounts. Savings and earnings from these transactions can be used to finance the buffer fund. Such system of centralized procurement also addresses the concern that a buffer fund will not work because of rising global oil prices.
The national government should also participate in storing, refining and retailing oil products in the country and use whatever earnings it will generate from these activities to finance the proposed buffer fund. Initially, the buffer fund can be financed through allocating a portion of the national budget and when un-utilized within the fiscal year should be carried over to the next fiscal year. Uncollected taxes from the oil companies, such as the P21 billion ($435,775,057 at the current exchange rate of $1=P48.19) in unpaid custom duties of Shell, can also serve as seed money for the buffer fund.
Remember that the OPSF failed because it was not used strictly as a buffer fund but was designed to protect the profits of the Big Three during oil price shocks. Established under Presidential Decree (PD) 1956 on Oct 10, 1984, oil firms replenished the OPSF when their pump prices were higher than world prices and withdrew from it when the reverse happened. To prevent the OPSF from drying up, government delayed rolling back the pump price even if world prices fell thus imposing the burden to refill the OPSF on hapless consumers while protecting the profits of the Big Three.
A strict set of guidelines on when the government can tap into the buffer fund should be drawn up to prevent unwarranted utilization and corruption. A trigger price may be computed by the Department of Energy (DOE) that will determine when the buffer fund should be used to mitigate sudden and huge increases in oil prices.
The point is there are alternatives to the Oil Deregulation Law and a concrete set of measures to implement them are available if only the legislators will seriously study these proposals. There is a need to engage lawmakers, government agencies, and their technocrats in a debate on these issues so as to prevent questionable policy proposals like the planned bill of Reps. Suarez and Arroyo from hijacking the people’s demand to scrap RA 8479 through their so-called partial regulation. Of course, they will have an advantage if the engagement is limited in congressional hearings alone. These efforts must be complemented by continued public pressure through protest actions, and broadening public support for oil industry regulation.(Bulatlat.com)
