Government mulls EO freezing fuel prices

Published by rudy Date posted on April 21, 2011

MANILA, Philippines – The government may resort to an “extreme legal measure” to cushion the effects of steadily rising oil prices – the issuance of an executive order banning further hikes, Justice Secretary Leila de Lima said yesterday.

“Talking about possibilities, there’s always such a possibility of coming up with an executive order freezing the oil prices. If it comes to that, it will basically and primarily be an executive decision or action,” De Lima told The STAR.

She said the previous Arroyo administration had resorted to freezing oil price increases in 2009, through Executive Order 839.

De Lima said such a measure would be “legally feasible.”

The DOJ, under the oil deregulation law, has the mandate to ensure that oil price adjustments are reasonable. The Department of Energy (DOE) has the same mandate and performs its task hand in hand with the DOJ.

De Lima’s warning came after the DOE demanded an explanation from oil firms for their price hikes last Tuesday – the 13th this year – after discovering that the last increases were above the agency’s prescribed adjustments based on a similar formula used by local firms. The oil firms have claimed that rising global crude prices prompted them to raise pump prices.

“For now, there is a presumption of regularity or correctness of the successive increases,” De Lima said.

Shell, Chevron and Total announced hikes in the prices of regular gasoline by 70 centavos per liter, unleaded gasoline, 60 centavos; diesel, 25 centavos; and kerosene, 40 centavos, effective 6 a.m. Tuesday. The DOE said the price hikes should have only been P0.16 per liter for diesel and P0.39 for gasoline.

After receiving a letter from DOE, Chevron cut its prices of unleaded gasoline by P0.60 per liter, diesel by P0.25 per liter, kerosene by P0.40 per liter and regular gasoline by P0.70 per liter at noon yesterday.

De Lima also reiterated her plan to put up a new body to be called “DOJ Office for Competition” that would “address cartels and restrictive agreements (among oil firms).”

The proposed body, she explained, would conduct “fact-finding investigations and determine whether violations of anti-trust and related laws are being committed by persons, natural and juridical.”

She said the body can make recommendations, including filing of charges against those found liable for possible manipulation of oil prices.

“This body will faithfully carry out constitutional and existing legal provisions against combinations in restraint of trade. Proceedings will depend on the specific industry and/or nature of the case,” she said.

“Deregulation or privatization does not mean big business is free to do anything under the sun. Public welfare is paramount,” she stressed.

She said the creation of the new office is DOJ’s response to calls from various sectors that checks be made on the oil firms’ justification for the recent oil price hikes.

Open books, oil firms dared

President Aquino dared oil companies to open their financial records to public scrutiny to prove they were not taking advantage of the public.

“That was my position ever since I have been in public service, isn’t it? If reasonable, why can’t they show it?” the President told reporters in an ambush interview at the Ninoy Aquino International Airport Terminal 3 in Parañaque where he led an inspection of the facility.

Aquino also said the DOE should find ways of simplifying the computation of prices for the benefit of the public.

“It (simpler process) will show, demonstrate (if prices) are right or wrong. And again, they repeatedly answer that all sectors are involved in the computation, face to face, nothing is hidden from them as to how pump prices are arrived at,” Aquino said.

“But the issue with the pricing, the (energy) secretary keeps on telling me that every time that they have been demonstrating the formula on how to arrive at (prices), they have been very transparent to include even the militant transport groups,” Aquino said.

DOE’s director for Oil Industry Management Bureau Zenaida Monsada earlier said the recent price hikes appeared to be higher than what official computation should indicate.

The DOE said the latest prices – P46.45 to P49 per liter for diesel and P53.60 to P60.81 per liter for gasoline – have already breached record highs in 2008.

Petron promised to freeze its prices during the Holy Week. “We have no plans of increasing this week,” the company said in a statement.

Unioil Petroleum Philippines Inc., for its part, is offering its gasoline products for P50 per liter for a minimum P1,000 purchase.

Unioil said the promo is in line with its commitment to corporate social responsibility.

“Since the Lenten season started last Monday we are now giving away free P50 worth of gasoline products with a P1,000 single receipt from any of our participating stations nationwide except Unioil Airport Road,” Unioil said.

“Since the public are about to go on a vacation we tried to ease the burden of the consumers by giving back discounted price for them to enjoy the holiday vacation,” a company statement read.

Task force convened

At Malacañang, presidential spokesman Edwin Lacierda announced the convening of the joint DOJ-DOE task force on oil prices.

Lacierda said the DOE has already sent letters to the oil companies to explain their price hikes.

“The DOE asked them to explain in writing why their numbers are higher than the others. It is now with the Joint DOJ-DOE task force,” he said.

The DOE-DOJ task force convenes everytime there is a questionable increase in fuel prices.

“It’s not right to implement an increase that’s higher than the computation,” Lacierda said in Filipino.

“The DOE is very open regarding the prices announced by the oil firms. What (Energy) Secretary Rene Almendras is doing is very transparent,” he said. “Some oil companies did not raise their prices,” he added.

“What we know for certain, the DOE is monitoring world market prices, they are in constant communication with various transport groups and affected sectors. There’s transparency in what the real oil prices are,” he said.

“We will know the basis of some oil firms for raising prices. The task force will evaluate abuse, if any. Petron did not increase, Chevron increased,” Lacierda observed.

Meanwhile, Sen. Ramon Revilla Jr. called on the DOE to look into possible abuse committed by the oil firms in their latest price hikes.

“The government should not let the oil firms play tricks on the public,” Revilla said. He said he found it suspicious that the oil firms announced the price hikes right after DOE’s announcement that a price increase was imminent. Revilla chairs the Senate committee on public services.

Sen. Edgardo Angara, chairman of the Congressional Commission on Science and Technology and Engineering (COMSTE), for his part, asked the administration to seriously develop fuel and transport alternatives amid the skyrocketing prices of fuel.

The COMSTE has been pushing for bigger government investment in the development of local electric and hybrid vehicles.

“We import roughly 96 percent of our petroleum, the majority of which is consumed by the growing transport sector. This same sector accounts for the biggest share of the energy use, nearing 40 percent,” Angara said.

Angara said the launching of the Asian Development Bank (ADB) funded electric tricycle project, is a big step toward ending the country’s dependence on imported fuel.

Flexible VAT

Former budget secretary Benjamin Diokno, meanwhile, voiced his support yesterday for the proposed bill of Cagayan de Oro City Rep. Rufus Rodriguez seeking a flexible value added tax (VAT) on petroleum products.

In a radio interview, Diokno – former President Joseph Estrada’s budget chief – said he favors a flexible VAT over fuel subsidies to ease the suffering caused by high oil prices on the people.

He said subsidies tend to favor only certain groups to the disadvantage of other sectors, and the program is difficult to implement.

On the other hand, a flexible VAT system in which the government suspends or substantially reduces VAT on petroleum products when crude prices reach certain level would benefit the entire population, he said.

Diokno did not say at what crude price level the VAT would have to be suspended or reduced.

But he said government revenue and expenditure projections in the 2011 budget were based on a crude oil price of $90 per barrel.

Crude is now selling at around $110 per barrel, he added.

The Rodriguez bill seeks to automatically suspend the 12-percent VAT on petroleum products when the price of crude hits $80 per barrel.

But Rodriguez said he was open to other schemes like adjusting the threshold to $90 and cutting VAT by half to six percent instead of suspending it entirely.

He said there would not be a big revenue loss on the part of the government as the oil industry is just one sector of the economy that pays VAT.

He pointed out that the levy is imposed on most consumer products and services, including electricity, which, he added, are as basic as oil to the public.

Militant party-list representatives have echoed Rodriguez’s call.

Bayan Muna Rep. Teddy Casiño said the Aquino administration is now reaping a VAT collection windfall since the price of crude is $20 more than its projected level on which 2011 revenue estimates were based.

In fact, he said the Department of Finance has announced that such windfall has amounted to more than P4 billion.

It’s time the government returns the excess collections to consumers in terms of a VAT suspension or reduction, he said.

He added that only people who can afford luxury cars don’t feel the pinch of high fuel prices.

President Aquino has said he is open to suspending or cutting VAT. With Jess Diaz, Delon Porcalla, Aurea Calica, Donnabelle Gatdula, and Christina Mendez, Edu Punay (The Philippine Star)

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