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Suspend Oil Deregulation Act, impose OPH moratorium

(The regular columnist gives way to IBON’s analysis of the oil price crisis. — Ed)

To protect the public and the domestic economy from the impact of the oil price crisis, the government must now suspend the implementation of Republic Act (RA) 8479 or the Downstream Oil Industry Deregulation Act of 1998 and impose a moratorium on oil price hikes (OPH).

President Arroyo herself already admitted that coping with escalating oil prices is now a matter of national survival. The only measure that could give considerable safeguard on the people and the economy right now is state intervention in pricing of petroleum products in the local market. The President should therefore exhaust all legal means to suspend RA 8479 and declare an OPH moratorium.

Oil companies in the country can absorb the impact of suspending the deregulation law and OPH moratorium amid sky-high global prices. According to IBON, they have been overpricing the public in the past years, as they took advantage of automatic price hikes allowed under a deregulated regime.

IBON reviewed the actual pump price movement from 2000 to 2004 and found out that oil products have been overpriced by a total of PhP3.68 per liter. Our estimate is based on the monthly fluctuation in the price of benchmark Dubai crude and foreign exchange (FOREX) rate, and applied a corresponding weight on the impact of Dubai and FOREX on the pump price.

This estimate is different from our estimates in the past where we used the old ‘rule of thumb’— which was dismissed as “outdated” by oil companies and the Department of Energy, saying Dubai crude and the FOREX have already substantially increased over the years.

Other proposed measures to mitigate the impact of the oil price crisis, including Rep. Joey Salceda’s suggestion to defer the implementation of the expanded value added tax (VAT) law, are meaningless if the government could not control the petroleum prices at the pump and provide the much-needed breathing space for the consumers and the economy. #

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