Original sin on oil prices
Original sin on oil prices
Posted 00:38am (Mla time) Mar 16, 2005
By Neal Cruz
Inquirer News Service
Editor's Note: Published on page A14 of the March 16, 2005 issue of the Philippine Daily Inquirer
FUEL prices are being raised by the oil companies every week, and this has a domino effect on the prices of everything else, since commerce and people depend on transportation to get from factories to consumers, and transportation, in turn, depends on oil to be able to move. Since Congress passed the Oil Deregulation Law that removed government control on the oil industry, prices have risen steadily without letup. It was like chaining the guard dogs and then opening the sheep pen's door to let the wolves in and attack the helpless sheep.
I think the Oil Deregulation Law and the Urban Land Reform Law are two of the most stupid laws ever passed by Congress. The motives behind them are commendable, but Congress failed to provide safeguards to prevent abuses, largely because it succumbed to lobbying by vested interests. These errors are now evident in the inexorable oil price increases and the increasing anarchy by squatters.
The motive of the Oil Deregulation Law is to encourage other oil players to compete with the three big oil companies already here -- Petron, Shell and Caltex -- so that competition and market forces will force prices down. But instead of prices going down, they went up. What went wrong?
Because of shortsightedness, lobbying and perhaps corruption, Congress left gaping loopholes in the law that allowed the oil cartel to continue dictating prices at will. Worse, it deprived government of any power to control prices.
First, no real competition materialized between the Big 3 and the new oil players. Many of the new players bought finished products from the Big 3 and resold them to the consumers. So how can they compete with the prices of the Big 3? On the contrary, they just followed the pricing of the cartel. In short, while there may be a hundred or so oil companies in the Philippines, it continued to be in the grip of the cartel.
What should have been done was to deregulate gradually to allow new players to become strong enough to really compete with the Big 3, during which time the government retained control of pricing to prevent opportunism. But the first thing our government did was to lift price controls, which was what the cartel wanted.
Other countries that deregulated their oil industries had long, open-ended and indefinite transition periods before full deregulation, during which time partial price controls remained. Only when there was real competition among the oil companies was full decontrol imposed.
If I'm not mistaken, South Korea has had oil deregulation for more than 10 years already, but it is still in partial decontrol mode, with price controls still in effect. Other Asian countries that also deregulated their oil industries followed the same procedure.
In contrast, our Congress provided for only a six- or three-month transition period. Worse, then-President Fidel V. Ramos shortened it to a farcical one month or so (if I remember right) when he signed the bill into law. In short, the original sins were committed by Congress and President Ramos, serpents in barong and suits, and our Paradise started its descent into Hell.
In sum, in spite of the Oil Deregulation Law, or because of it, we are still in the clutches of the oil cartel -- in fact, two oil cartels, one composed of the oil producers, the Organization of Oil Exporting Countries, and the other composed of the refiners and producers of the finished products, the cartel in the downstream oil industry right here.
Our Constitution clearly says that it is the duty of the state to dismantle monopolies, cartels and restraints in trade. Based on this provision, then-congressman (now Bataan governor) Enrique Garcia filed a petition with the Supreme Court to declare the Oil Deregulation Law unconstitutional. The Court decided in his favor and the law was sent back to Congress and amended.
Garcia argued that the law was still unconstitutional because the transition period, which would make sure that the intent of deregulation would be fulfilled before full deregulation, was unrealistically short. The Court replied that that is "a judgment call" of Congress, but until know, 10 years later, it has not made a definite decision on the case brought to it by Garcia. While the Court tarries and delays justice, the people are suffering from the lack of wisdom of that law.
Before Garcia's term as congressman expired, he had filed a bill to repeal or amend the Oil Deregulation Law to make it conform to its original purpose, but Congress adjourned without acting on it, largely because, Garcia suspects, of the influence of the cartel. Although he is no longer a congressman but a provincial governor, Garcia continues his fight against the oil cartel. His son replaced him as congressman, and Rep. Antonio Roman represents the other congressional district of Bataan. Together, they are continuing the fight in Congress. At the last Kapihan sa Manila forum on oil prices and the Oil Deregulation Law, Roman bewailed the lack of action of the present Congress and the slowness of the Supreme Court in deciding the case brought to it by Garcia, while the consuming public continues to suffer at the hands of the cartel.
What's taking the honorable justices so long? Do they need 10 years to decide what is right and what is wrong? In case of doubt, the tradition is to resolve it in favor of the people, not of big business. But has big business been able to reach the honorable justices of the Supreme Court, just like they have the members of Congress?
Posted 00:38am (Mla time) Mar 16, 2005
By Neal Cruz
Inquirer News Service
Editor's Note: Published on page A14 of the March 16, 2005 issue of the Philippine Daily Inquirer
FUEL prices are being raised by the oil companies every week, and this has a domino effect on the prices of everything else, since commerce and people depend on transportation to get from factories to consumers, and transportation, in turn, depends on oil to be able to move. Since Congress passed the Oil Deregulation Law that removed government control on the oil industry, prices have risen steadily without letup. It was like chaining the guard dogs and then opening the sheep pen's door to let the wolves in and attack the helpless sheep.
I think the Oil Deregulation Law and the Urban Land Reform Law are two of the most stupid laws ever passed by Congress. The motives behind them are commendable, but Congress failed to provide safeguards to prevent abuses, largely because it succumbed to lobbying by vested interests. These errors are now evident in the inexorable oil price increases and the increasing anarchy by squatters.
The motive of the Oil Deregulation Law is to encourage other oil players to compete with the three big oil companies already here -- Petron, Shell and Caltex -- so that competition and market forces will force prices down. But instead of prices going down, they went up. What went wrong?
Because of shortsightedness, lobbying and perhaps corruption, Congress left gaping loopholes in the law that allowed the oil cartel to continue dictating prices at will. Worse, it deprived government of any power to control prices.
First, no real competition materialized between the Big 3 and the new oil players. Many of the new players bought finished products from the Big 3 and resold them to the consumers. So how can they compete with the prices of the Big 3? On the contrary, they just followed the pricing of the cartel. In short, while there may be a hundred or so oil companies in the Philippines, it continued to be in the grip of the cartel.
What should have been done was to deregulate gradually to allow new players to become strong enough to really compete with the Big 3, during which time the government retained control of pricing to prevent opportunism. But the first thing our government did was to lift price controls, which was what the cartel wanted.
Other countries that deregulated their oil industries had long, open-ended and indefinite transition periods before full deregulation, during which time partial price controls remained. Only when there was real competition among the oil companies was full decontrol imposed.
If I'm not mistaken, South Korea has had oil deregulation for more than 10 years already, but it is still in partial decontrol mode, with price controls still in effect. Other Asian countries that also deregulated their oil industries followed the same procedure.
In contrast, our Congress provided for only a six- or three-month transition period. Worse, then-President Fidel V. Ramos shortened it to a farcical one month or so (if I remember right) when he signed the bill into law. In short, the original sins were committed by Congress and President Ramos, serpents in barong and suits, and our Paradise started its descent into Hell.
In sum, in spite of the Oil Deregulation Law, or because of it, we are still in the clutches of the oil cartel -- in fact, two oil cartels, one composed of the oil producers, the Organization of Oil Exporting Countries, and the other composed of the refiners and producers of the finished products, the cartel in the downstream oil industry right here.
Our Constitution clearly says that it is the duty of the state to dismantle monopolies, cartels and restraints in trade. Based on this provision, then-congressman (now Bataan governor) Enrique Garcia filed a petition with the Supreme Court to declare the Oil Deregulation Law unconstitutional. The Court decided in his favor and the law was sent back to Congress and amended.
Garcia argued that the law was still unconstitutional because the transition period, which would make sure that the intent of deregulation would be fulfilled before full deregulation, was unrealistically short. The Court replied that that is "a judgment call" of Congress, but until know, 10 years later, it has not made a definite decision on the case brought to it by Garcia. While the Court tarries and delays justice, the people are suffering from the lack of wisdom of that law.
Before Garcia's term as congressman expired, he had filed a bill to repeal or amend the Oil Deregulation Law to make it conform to its original purpose, but Congress adjourned without acting on it, largely because, Garcia suspects, of the influence of the cartel. Although he is no longer a congressman but a provincial governor, Garcia continues his fight against the oil cartel. His son replaced him as congressman, and Rep. Antonio Roman represents the other congressional district of Bataan. Together, they are continuing the fight in Congress. At the last Kapihan sa Manila forum on oil prices and the Oil Deregulation Law, Roman bewailed the lack of action of the present Congress and the slowness of the Supreme Court in deciding the case brought to it by Garcia, while the consuming public continues to suffer at the hands of the cartel.
What's taking the honorable justices so long? Do they need 10 years to decide what is right and what is wrong? In case of doubt, the tradition is to resolve it in favor of the people, not of big business. But has big business been able to reach the honorable justices of the Supreme Court, just like they have the members of Congress?
posted by Dante at 4:45 PM
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