DEREGULATION: A MATTER OF TRUST

The Philippine Star
11/28/08

With the number of legislators calling for an investigation on what appears to be the slow pace of reduction in pump prices of oil products in the country, it would not be surprising if the Oil Deregulation Law passed a decade ago would be subjected to review and amendment.

The latest member of Congress to issue a call for a full inquiry is Sen. Mar Roxas, who noted that the Philippines continues to have high domestic prices of petroleum products despite a sharp drop in world crude oil prices brought about by the deepening in the current global financial crisis.

In particular, Sen. Roxas commented on the slow action of oil companies to lower prices, and their seemingly lack of concern over the Department of Energy’s regulatory initiatives. The good senator’s view, which is shared by a growing number of legislators, is that the oil companies, specifically the big ones, i.e., Petron and Shell, go on their merry way of giving the consuming public small dosage of relief despite repeated calls by the government to reflect in the pump prices the drastic drop in world crude prices.

According to Roxas’ think tank, Asian Dubai crude prices are now around $55 per barrel, or half the peak price of $112.86 per barrel last August. In contrast, the price of unleaded gasoline sold at retail pump stations is P41.96 per liter, reflecting a reduction of only P13 a liter from the peak price of P54.96 per liter last August.

Roxas reiterated the need for the DoE to exercise its visitorial powers, as granted by the Oil Deregulation Law, and the need to inspect the books of oil companies to see if their prices are justified.

Growing numbers

Just before Sen. Roxas issued his statement, Sen. Juan Ponce Enrile – a couple of days before the Senate coup installed him as Senate President – had delivered a strongly-worded privilege speech before his colleagues urging for a revisit of the oil deregulation law.

Weeks before that, Sen. Francis “Kiko” Pangilinan had been doing his own investigations, and in the course, had noted a seeming collusion between two major oil companies – again, Shell and Petron – on the setting of pump prices.

In the Lower House, a number of congressmen have also been making noises about either revising the law that had released the oil companies from the government’s regulated watch.

Cong. Eduardo Gullas of Cebu had been one of the earliest of the lawmakers to question what he perceived were the massive powers of Shell and Petron to control prices. The two oil firms together share over two thirds of the local market.

Catanduanes Representative Joseph Santiago had recently raised the possibility of imposing additional measures that would guard against excessive earnings of the oil companies, especially those that have refineries in the country. Cong. Santiago is pushing for the imposition of a windfall profit tax on the excessive profits earned by oil companies at the time when crude prices were soaring.

Another lawmaker, Quezon Representative Danilo Suarez, had initiated in the lower house a congressional inquiry to determine whether the oil pricing latitude enjoyed by oil companies that came with the deregulation of the industry is being abused.

More transparency needed

The oil deregulation law had been passed ten years ago to allow market forces to dictate the cost of gasoline and other oil products. It’s a pity that what the oil industry had worked so hard for in the mid-1990s seems fated to be taken back.

But then again, perhaps the law could be improved especially in view of the apparent delay in pump price reductions when crude oil is on the downswing. I heard that Thailand has a mechanism that works well and allows consumers to fully benefit from crude price reductions.

When law makers had passed the bill proposing that the oil industry be deregulated, it was to give oil companies the opportunity to quickly recover any losses that could result from rising crude prices. But it was also expected, as a measure of trust, that the oil firms pass on to the consuming public lower prices when crude costs are dropping.

We hope that this trust is not breached.

Reaction to Sycip’s speech

One reader, Macario Galvez, Jr., sent this letter in response to a speech by Washington Sycip that was delivered during one of the many activities of the University of the Philippines in commemoration of its centennial celebration, which in part was reprinted in this column. Here is our reader’s comment.

“I have read your column about the speech given by the venerable Mr. Washington Sycip re UP's role in the country's development. Yes, UP, after 100 years of providing world class education and exemplary graduates in various fields of endeavor, has seemingly lost that grip of excellence in turning the fate of this nation around.

“Nowadays you will hear or read comments that question the real contribution of UP to society at large in the past 100 years. With all the topnotch leaders, politicians, ideologues, professionals and civic workers, we ask: What has UP indeed done to this country?

“As a UP alumnus, and a student of history, I can say that UP has done a lot to move this country forward to progress notwithstanding the havoc caused by some of its infamous alumni.

“On the population issue, most of the proponents and supporters of the Reproductive Bill are from UP. I join the proponents led by Reps. Edcel Lagman and Janet Garin in seeking a resolution and ultimate passage of this bill.

“The stark reality is clear in our roads, in the urban blight, even in some establishments where the faces of poverty, overpopulation and unemployment are often seen. A rational, relevant and realistic reproductive health bill is NOW needed more than ever.

“As an EDSA 1 and 2 veteran, I am saddened and distressed by the fact that we still have one of the longest running insurgencies in the world. Yes, most of the major players are from UP.

“If there is one thing that can propel this nation to greater heights- it is to find a way to resolve once and for all the Muslim and the CPP-NPA rebellion. How? That is the big question that all peace loving and progressive Filipinos should concern themselves with.

"Presently, I am involved in the organization of the first UP Alumni cooperative. Our main objectives are to create jobs, alleviate poverty, utilize local resources to stimulate business opportunities and to go into grassroots education, community organization and vaccine research.

“We are aware that our country is in a dysfunctional state, to say the least, but we have also agreed that collectively we can move things and influence events in our own small way. This is better than fence-sitting and whining and not doing anything.

“This is our answer and our contribution to UP's 100 years of excellence, leadership and service.”

We hope that this positive gesture by a group of UP alumni will be echoed by others, more so now as the country gears up for possibly one of the worst economic nightmares in history.

Naming the top four collegiate teams

Collegiate basketball fans are invited to submit their choice of the top four collegiate teams in the country. Visit the official website of PCCL, www.CollegiateChampionsLeague.net for more details about the year’s biggest event in college basketball, the Philippine Collegiate Championship games, that is ongoing at The Arena, San Juan City. 

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, SalcedoVillage, 1227 MakatiCity. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.