Call for Oil Deregulation Law review mounts

Published by rudy Date posted on August 18, 2009

THE Department of Energy and an industry lobby group are moving for a review of the law that has given oil firms a free reign in dictating prices at the pump.

In a statement, Consumer Oil Price Watch (COPW) on Monday asked Congress for a return to a regulated environment in the downstream petroleum sector to put a check on oil firms’ prices.

Led by businessman Raul Conception, the group said that the pricing strategies that companies are employing today have only resulted in higher prices.

The group said that there would have been an P8 per liter reduction in March and April if refiners Petron Corp. and Pilipinas Shell Petroleum Corp. bought crude when prices were low in February and March.

But the refiners refused to buy forwards and incurred under recoveries amounting to P6 billion. The government had persuaded them to limit their increases to P0.50 per week to soften the impact on consumers and the riding public.

Add to this the Department of Energy’s seeming impotence in the face of successive price hikes at the pump.

Energy Secretary Angelo Reyes said the agency is also backing a review of the Downstream Oil Deregulation Act of 1998 to once and for all settle pricing issues at the pump.

“The others don’t seem to understand the implications of having a regulated and deregulated environment. So it’s time to review and find out what we really like,” he said.

It would be recalled that since the start of the year, oil companies have implemented weekly adjustments in prices supposedly to keep their costs in tune with fluctuations in the world market.

This tack, however, has drawn flak from consumer and transport groups because of consecutive price increases for the month.

Prior to the deregulation, the so-called Big Three—Petron Corp., Pilipinas Shell Petroleum Corp. and Caltex Philippines (now Chevron)—set domestic prices.

Prices then were tempered through a government-imposed Oil Price Stabilization Fund (OPSF) from which the companies could draw instead of adjusting prices. Government subsidies to the fund, however, ballooned to billions of pesos, leading to its dismantling.

To prevent this from happening again, COPW proposed that importation of petroleum products be left to the oil industry.

Also, “we will request that the oil companies make the necessary investment which will be the basis for the regulators to determine whether they can increase or decrease their prices under a performance-based system,” the group said.

Industry players, however, warned that the return to a regulated environment will stunt the growth of small Filipino-owned oil firms—the so-called independent players that shot up after the passage of the deregulation law.

Francis Glenn Yu, Seaoil Philippines Inc. president, told The Manila Times that regulating pump prices would not bode well for independent players as their “fiscalizing effect” in the industry would be halted.

“[Regulation will put a stop] to the development of independent players,” he said.

Despite this, the Seaoil official said that the company is not in a position to question any decision the government would take with regard to regulating the industry.

“We are neither for it or against it,” he added.

Formed in 1997, Filipino-owned Seaoil is the first independent fuel company to put up a gasoline retail station in the country, following passage of the deregulation law.

Other industry players, who declined to be named, also averred that regulating the industry again would only be detrimental to small oil players, whose retail station number anywhere from a handfull to over a hundred each.

Industry estimates place the share of independent players at between 10 percent and 15 percent of the 3,700 outlets nationwide.  –Euan Paulo C. Añonuevo, Reporter, Manila Times

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