New Oil Price Hikes to Stir Calls for Deregulation Law’s Repeal

Unpredictable - and, as cause-oriented groups say, unjustified - oil price hikes have become concrete results of oil deregulation. Demands to repeal the oil deregulation law and to nationalize the oil industry may be expected in the months ahead as OPEC continues to ignore calls to increase production output in order to lower world crude prices.

By DANILO ARAÑA ARAO
Bulatlat.com

What makes the recent oil price hike in the Philippines different from the previous ones is the claim from no less than the Organization of Petroleum Exporting Countries (OPEC) that “fundamentals did not warrant current high prices.”

OPEC Secretary-General Alvaro Silva last week said that world oil supplies and inventories were sufficient. He was reacting to a call from non-OPEC member Russia for the OPEC to “raise production to dampen high crude prices.”

The OPEC, however, acknowledged that current political tensions in Venezuela and Nigeria could be the reason why current prices remain high. According to the Moscow Times (Nov. 5), these two OPEC member-nations “have suffered oil supply problems over the past year after a failed coup attempt in Venezuela and civil disturbances in Nigeria.”

To make matters worse, the OPEC, at its meeting last September, decided to cut production by 900,000 barrels per day effective this November. The organization is scheduled to meet on Dec. 4 to set its output policy for the first quarter of 2004.

Despite OPEC’s assurance that there is enough oil on the market, non-OPEC oil producers like Russia exhorted an immediate production boost to bring prices down to at least $24 to $25 per barrel.

They are apparently worried that, as in the past, there is currently an increased demand for oil given the winter season that could affect oil prices.

Irony of oil deregulation

Pilipinas Shell and Petron Corporation increased oil prices last Nov. 4 by Php0.40 per liter for gasoline, diesel and kerosene and Php1 per kilogram for LPG. Oil executives stressed that these are “a result of sustained increase in the international prices of crude and finished oil products in October 2003.”

Dubai crude in September reached $25.37 per barrel and increased to $27.27 per barrel last October. The peso-dollar exchange rate was pegged at P55.02 per US dollar in September, and P54.97 per US dollar in October.

It is ironic that last March, Energy Secretary Vincent Perez said that there is an expected downtrend in prices when tensions in Iraq are resolved. He called for sobriety then amid calls by concerned legislators and cause-oriented groups to repeal the oil deregulation law in the wake of a series of oil price hikes during the first quarter of this year.

Since the enactment of Republic Act No. 8479, also known as the Downstream Oil Deregulation Act of 1998, pump prices of petroleum products have become unpredictable and the pricing formula, virtually unknown. This is mainly because oil companies now have the freedom to peg prices of their products without prior notice to the public.

The deregulated regime saw the Department of Energy (DoE), in particular the Energy Regulatory Commission (ERC), being reduced to, among others, mere facilitators of investments in the downstream oil industry. It cannot even intervene in this highly sensitive industry through low competitive pricing given the privatization of Petron as early as 1994.

Unpredictable - and, as cause-oriented groups say, unjustified - oil price hikes have become concrete results of oil deregulation. Demands to repeal the oil deregulation law and to nationalize the oil industry may be expected in the months ahead as OPEC continues to ignore calls to increase production output in order to lower world crude prices.

Indeed, the downstream oil industry is a sector that is in dire need of a “regime change.” Bulatlat.com

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