RESTORE OIL INDUSTRY REGULATION TO ENSURE TRANSPARENT, REASONABLE PRICING

The recent announcement by local oil companies that they would need to increase oil prices by as much as P10 to P11 per liter highlights the urgency of reinstating regulation of the oil industry, according to independent think-tank IBON Foundation.

IBON said that deregulation has not affected the domination of the three major oil companies (Shell, Petron and Chevron) of the local petroleum market. Instead, it has merely given the oil giants more room to manipulate pump prices since their transactions with their parent companies abroad have become even less transparent with price adjustments no longer subject to public hearings. The unregulated environment gives oil firms greater freedom to overprice and engage in transfer pricing.

The think-tank further pointed out that the recent P1.50 hike in pump prices implemented at the end of May was the largest hike since October 2001 when average retail prices went up by P1.20 per liter. It added that the oil companies are threatening even higher weekly hikes of P2 per liter allegedly to speed up recovery of their costs.

Data from the Department of Energy show that the three major oil players continue to control the bulk of the downstream oil market since the 60 new entrants that have entered the sector since 1998 accounted for an average of only 12% of total market share since the oil industry was deregulated.

IBON added that high world oil prices remain a result of the dominance of a few giant oil transnational companies – such as Royal Dutch Shell, Chevron Texaco, Total and Exxon Mobile – over the global oil industry. Oil prices are pushed up further by unhindered speculation in global oil futures markets. The monopoly of the oil giants over the downstream and upstream levels of the industry makes them immune to the effects of supply and demand and allows them to dictate the prices at which they sell their products independent of changes in crude oil production.

AMID RECORD-HIGH OIL PRICES:THINK-TANK RENEWS CALL TO REPEAL OIL DEREGULATION LAW

Drastic measures are urgently needed to minimize the vulnerability of the Philippines to high global oil prices. Independent think-tank IBON Foundation says this includes the immediate suspension and eventual repeal of the Oil Deregulation Law and setting up a mechanism for government control of oil price hikes to ensure reasonable pump prices.

At present, the only measure that the Arroyo regime is implementing to cushion the impact of increasing global oil prices is the automatic tariff mechanism. But this measure only delays oil price hikes and does not ensure fair price adjustments.

As noted recently by the United Nations, the Philippines is among the countries that are most vulnerable to oil price shocks because it is heavily dependent on imported oil. Worse, more than 90% of the local oil industry remains in the monopoly control of giant transnational corporations (TNCs) through their local units Petron, Shell, Caltex, and Total.

The monopoly of these companies has been further strengthened by the Oil Deregulation Law where automatic oil price hikes are allowed. Consequently, oil companies took advantage of the policy, hiking pump prices of all petroleum products by around 535% since the Oil Deregulation Law was first implemented in April 1996.

The Oil Deregulation Law also provided the big oil companies more space to manipulate pump prices. IBON estimates show that since 2000, pump prices are overpriced by as much as P4.55 per liter as oil price hikes were left unregulated.

Unfortunately, the Department of Energy (DOE) could only talk about its “long-term plans” anchored on questionable programs such as biofuels, aside from its tariff adjustment mechanism, when drastic measures are needed by the people urgently.

IBON reiterates its call for Congress to suspend and repeal the Oil Deregulation Law. Only state regulation and control can assure the country’s energy security right now amidst a highly speculative and volatile global oil market.