MANILA, Philippines - A leading consumer advocacy group yesterday proposed a return to a regulated oil industry to keep domestic oil prices in check.
In a press conference, the Consumer and Oil Price Watch (COPW), led by its chairman, Industrialist Raul T. Concepcion, noted that Republic Act 8479 or the downstream Oil Industry Deregulation Act of 1998 is no longer working effectively. Under the law, government allowas market forces to determine oil prices.
“When the industry was regulated in the early 1990, the late President Corazon Aquino requested Finance Secretary Jesus Estanislao and myself as chairman of the Oil Price Watch to explain to IMF managing director Michael Camdessus that the OPSF Fund was in a deficit by more than P10 billion and since the price in the world market dropped dramatically, we committed to the IMF managing director that we will not lower our prices until our deficit is wiped out, ” Concepcion recalled.
He said Aquino requested COPW to “make a public statement why we have to honor our commitment not to lower oil prices, notwithstanding the dramatic reduction of oil prices in the world market.”
Concepcion said reverting though going back to a regulated regime, will not mean government will be engaging in oil importation.
“As we propose a return to a regulated oil market, we will ensure that the government will no longer import crude or finished products which should be left to the oil industry players,” he said.
“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,” Concepcion pointed out.
He said his proposal to revert back to a regulated oil industry was based on several considerations.
One, he said, is that “the DOE has consistently pronounced that since the industry is deregulated, they are free to increase their prices even if Shell and Petron, as refiners can use MOPS (Mean of Platts Singapore) pricing and not Dubai, as it is free market forces and competition will determine pricing.
MOPS is the benchmark used by oil importers while Dubai crude is the price gauge used by refiners. Recently, since oil refiners are also importing finished products, they are using MOPS in pricing their products.
Concepcion has been critical of this scheme, saying that these oil companies should be using Dubai in pricing their products.
Under the deregulation law, Concepcion noted that the DOE-DOJ Task Force is required to establish on a weekly basis the value of the crude oil imported by the refiners based on Dubai and for the new players based on MOPS pricing.
“If the refiners bought crude oil in February for delivery in March at $33.98 per barrel, the price reduction would have been P8 for the month of March and if they bought crude in March for delivery in April at $37.51 per barrel, the price reduction would also have been P8 for the month of April,” he said.
He also pointed out that “the oil refiners refuse to buy forwards and incurred underrecoveries amounting to P6 billion because government persuaded them to limit their increases to 50 centavos per week to soften the impact on consumers and the riding public.”