Greasy grip on oil prices

Philippine Online Chronicles
Published 06 November 2009

Hit by the executive’s whip, oil firms and business groups are now making a backlash at the Palace. But who really wins at the end of the charade?

At the center of controversy is President Gloria Macapagal Arroyo’sExecutive Order 839 (EO 839), which was issued last Oct. 23 to impose a rollback of pump prices in Luzon to Oct. 15 levels following a series of hikes by oil  companies amid the aftermath caused by typhoons. EO 839’s implementation broke the usual silence between the Arroyo government and oil companies, spawning a heated exchange of statements from both sides.

The price control order came out at a time when key government officials were singing in chorus with the public in condemning the oil firms’ profiteering despite the calamity. House SpeakerProspero Nograles even labeled Petron, Caltex and Shell as showing the highest point of ingratitude for raising gas prices twice as Filipinos still reel from the damage wrought by typhoons Ondoy and Pepeng. Presidential son and Rep. Juan Miguel “Mikey” Arroyo, for his part, called for government regulation of oil prices during calamities – which her mother readily granted.

Firms flinch for profit’s sake

As expected, the government’s price freeze order drew the strongest opposition from the business sector. Foreign business chambers including major oil firms under the Joint Foreign Chambers of the Philippines (JFC)criticized Malacañang’s “open-ended” price freeze on petroleum products and sought for the immediate lifting of the Executive Order 839 (EO 839). It said its members are “particularly concerned about the open-ended nature” of the price control with no specific “sunset date.”

The Management Association of the Philippines (MAP), along with other business groups, aired the same position. In a statement posted at BusinessWorld Online, it said that the order “is based on an oversimplified but misleading view of the problem.” It also threatened a shortage in the supply of petroleum products and an emergence of a black market.

Earlier, “Big Three” oil companies and independent players warned of a possible supply shortage due to the price cap on oil, saying that they may cancel their importation until the EO is lifted. Oil companies also said the price cap will inflict revenue losses. GMA News.tv reported that Petron Corp., the Philippines largest oil company,will incur “P1.5 billion losses for the last quarter.”

Labor center Kilusang Mayo Uno (KMU), however, labeled the threats being floated by oil firms as an “overreaction to placebo medication.” In its statement, KMU said “oil companies are simply deplorable in defending their gross profiteering with the excuse that there will be shortage at the slightest pinch in their purse.” Meanwhile, militant transport group Piston (Pinagkaisang Samahan ng mga Tsuper at Opereytors Nationwide) accused oil firms of raking in profits despite the price ceiling due to overpricing. Former National Economic Development Authority (NEDA) chief Ralph Recto maintains that local oil products are overpriced by P8.

Iron fist?

Amid a volley of threats and statements from the business sector, Malacañang is by far standing firm on its imposition of the price ceiling on oil. In a GMA News.tv report, deputy presidential spokesperson Lorelei Fajardo stressed that the price freeze on oil products will remain “for as long as there is a state of calamity in Luzon.” Instead of heeding the calls made by business groups, Palace officials even dared oil firms to open their records for audit, saying “oil firms should not “hide behind the protection of deregulation as provided by the law.

Sounds like the executive is using its iron fist? Perhaps the basic fact that EO 839 is a temporary measure should make it clear that President Arroyo is not waging an all-out war against oil firms’ profiteering. The “greasy” drama over control of oil prices may actually end anytime soon upon the discretion of the President, prompting a look at alternatives to the excesses and shortcomings of the current deregulated oil industry.

A permanent grip on oil prices

At the House of Representatives, Bayan Muna Partylist Rep. Satur Ocampo challenged Arroyo not only to maintain price controls but to push for the repeal of the Oil Deregulation Law to effectively curb oil prices in the long-term.

In a statement posted at the Bayan Muna Partylist website, Rep. Ocampo said that “at the onset, the oil deregulation law should be repealed and all its effects on the oil industry reversed.” He also demanded the government to place Petron under its control again to pave the way “for the eventual nationalization of the oil industry.”

Senator Francis “Chiz” Escudero also proposed the repeal of the deregulation law at the maximum amid the pressure being exerted by business groups to lift the price ceiling. In a press release, he said: “The law has become an artifact. We have to act quickly before the forecasts of oil prices soaring, once again, above the US$100 level become a reality when the global economy recovers from today’s crisis.”

KMU, in its website, laid down specific proposals to overhaul the oil industry and put a brake on big oil firms’ profiteering. Among its proposals are 1) centralization of oil’s importation under the government’s hands to pin down cheaper sources of oil or alternatives; 2) forging of special agreements with government-owned oil companies abroad; and 3) establish a buffer fund that will be financed by the government’s earnings and savings in its increased participation in the downstream oil industry.

The Arroyo government, however, has been consistently opposed to the idea of a regulated oil industry. Instead, key Malacañang allies in Congress like Speaker Nograles and Rep. Mikey Arroyo are calling for a faster review of the Oil Deregulation Law. But Piston said in a statement that a review of the deregulation law is only a waste of time and public funds since the law has been proven to be “abusive and anti-people.”

In recent developments, Malacanang rejected a dialogue with oil companies but the Department of Energy-Department of Justice (DOE-DOJ) taskforce said the order may soon be lifted in specific areas as the government and oil firms try to reach an agreement on a mutually acceptable response, a report posted.

Consumers should brace for a P4.50 per liter increase in prices of diesel and gasoline once Malacanang lifts the price cap, according to an oil company executive.

At the sidelines of the debate surrounding EO 839, thousands of families affected by the onslaught of typhoons are hoping that the price freeze will last forever – which will never actually happen in a deregulated environment as transnational corporations wield ultimate control over the country’s oil industry.

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