This story
was taken from Bulatlat, the Philippines's alternative weekly
newsmagazine (www.bulatlat.com, www.bulatlat.net, www.bulatlat.org).
Vol. V, No. 23, July 17-23, 2005
Review Body Backs Oil
Deregulation; for Fare Deregulation
The arguments raised are
nothing new, and the conclusions and recommendations made are not surprising.
Aside from being overshadowed by the media’s attention to the current political
crisis, this could explain why not much media coverage was given to the findings
of the independent committee tasked to review the oil deregulation law. However,
the obvious still needs to be restated if only to highlight the government’s
unwavering stance to fully support oil deregulation, even if it means the
eventual deregulation of land transportation fares.
By DANILO ARAÑA ARAO An independent committee
that is supposed to objectively ascertain the impact of oil deregulation ended
up echoing what government officials have been saying all along: Oil
deregulation must continue, socially-sensitive petroleum products must not be
subsidized, price increases are justified and most oil companies are losing
money. In addition, there must be an “automatic fare setting mechanism or
formula that can adjust fares quickly in response to increases or decreases in
fuel prices.” The six-person Independent
Review Committee (IRC) submitted last June 30 to the Department of Energy (DoE)
its report on the review of Republic Act (RA) No. 8479 or the Downstream Oil
Deregulation Act of 1988. In December 2004, then
Energy Secretary Vincent Perez recommended an independent review of the oil
deregulation law because of the public’s perception that “the deregulation law
is largely the cause of higher oil prices." The committee was formed in March
2005 as a result of the public clamor to analyze the current deregulated regime
in the wake of successive oil price hikes. Carlos Alindada, retired
chair of SGV & Co. and a former commissioner of the Energy Regulatory
Commission, served as chair of this committee. Its members are Cedric Bagtas
(deputy general secretary of the pro-government Trade Union Congress of the
Philippines), Merceditas Garcia (president of the Federation of Petroleum
Dealers of the Philippines), Jose Leviste, Jr. (chair of the Philippine Business
Leaders Forum, Inc.), Alberto Suansing (secretary general of the Confederation
of Land Transport Organizations of the Philippines) and Dr. Peter Lee U (dean,
University of Asia and the Pacific School of Economics which has links with the
conservative Opus Dei). The 60-page report, a copy
of which was obtained by Bulatlat, acknowledged weaknesses in the
implementation of oil deregulation that resulted in “illegal, unsafe and unfair
practices” like smuggling. Despite this, the report said, “Deregulation brings
about market forces such as competition which has the tendency of reducing
prices as against prices produced by a fixed formula which are not affected by
market forces.” Certain reforms, however,
were identified. The committee recommended that the DoE monitor oil prices
regularly and consequently inform the public of its monitoring. Given that
Petron Corporation still has government representatives in its board, the oil
company can serve as a “price moderator.” The committee stressed that Petron
suits the role since it is both a refiner and market leader. As regards price increases,
this was attributed not to oil deregulation but to the escalating world prices
and fluctuations in the peso-dollar exchange rate. The frequency of such
increases was said to be due to the “positive government suasion for oil
companies to spread major price increases over a longer period rather than in
one big jump.” The committee said that
there is no cartel in the downstream oil industry. “When products are
interchangeable, when market share is the `name of the game’ and competition is
in full swing, we should expect that oil companies’ prices will seem to rise and
fall at the same time.” Analyzing
the findings Except for a more explicit
support for the deregulation of transportation fares, the arguments, conclusions
and recommendations are nothing new. The DoE and other government officials have
time and again identified the advantages of oil deregulation and that the
negative effects like increased prices are just “birth pangs” of the policy.
While the report
acknowledged that there are more industry players and that gasoline stations and
LPG dealers have increased in number, it is surprisingly silent on the fact that
most of them are concentrated in urban areas, as argued by cause-oriented and
transportation groups. That petroleum products remain inaccessible to those
living particularly in remote areas is a situation that the report failed to
address. The same can be said for
the “jeepney lane” in 347 selected stations nationwide that give discounts on
diesel up to one peso a liter. Data from the DoE show that out of this number,
53 percent (184 stations) are in Metro Manila, while other parts of Luzon,
Visayas and Mindanao only account for 29 percent (100 stations), 7 percent (24
stations) and 11 percent (39 stations). Given its members’ access to all the
data from DoE, one therefore wonders why such statistics have not been included
in the report. The report also failed to
analyze monopoly pricing in hard-to-reach areas as a result of oligopolistic
practices of oil companies. While it exerted an effort to research on petroleum
prices in other countries, it was with the end-view of proving that local prices
are lower. Such prices were not analyzed in the context of wages and purchasing
power in each of the respective countries. Had it done so, the public outcry in
the Philippines over increased prices of petroleum products in the country would
be better appreciated given low wages and high cost of living. Indeed, the committee
members failed to distinguish between accessibility and affordability of
petroleum products.
Deregulated fares as policy reform? The committee supports the
deregulation of land transportation fares, as may be gleaned from its argument
that “land public transport is currently disadvantaged because while their fares
are regulated, the cost of their key input, namely fuel, is deregulated.” It
noted that public transportation casts “an envious eye on the oil companies who
are able to automatically translate any increase in international prices to
their pump prices.” This implies that
deregulation of land transportation fares could be a major policy reform under
the Arroyo administration. Indeed, the current debate on what to do must not
only be in the realm of politics, but also in economics, of which the situation
of the downstream oil industry could be a start. After all, the report
failed to analyze the roots of the problem besetting the downstream oil industry
given that it harped on the assumption that deregulation must be given a chance
to work. Bulatlat © 2004 Bulatlat
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