Repealing the Oil Deregulation Law will be a step backward and may constitute a violation of some of the country's covenants with international creditors, according to Finance Secretary Jose T. Pardo.
Pardo was reacting to a threat by Congress that it will repeal the law unless local oil companies moderate their oil price increase. Pardo said such a move will be like "turning back." Unfortunately, Pardo said: "We cannot bring it back. Instead we should look for some other mechanism."
Finance Undersecretary Joel Bañares, warned that repealing the Oil Deregulation Law may constitute a violation of some of our covenants with such institutions as the International Monetary Fund.
Oil deregulation was among the structural reforms that the government had vowed to undertake as part of its program with the IMF.
Pardo noted that one possible mechanism is the proposed National Oil Exchange Corp. which will basically determine the oil requirements of the country and then get suppliers to bid for the right to supply the country.
Unfortunately, Pardo said, the oil exchange mechanism is "not so simple" especially since some of the new players are still small and have not established a nationwide distribution system.
Even the possibility of the local government joining in and setting up pumping stations, Pardo said, still has to be studied.
There is also a need to compare the proposal with the established distribution system of the three top oil companies which are already cost efficient, he added.
Pardo surmised that the repeal of the Oil Deregulation Law is just a "political posturing." The clamor to repeal the Oil Deregulation Law has been building up following the announcement of the local oil companies for one-peso increase in oil prices.
Militant groups want the government to revert back to the old system of the Energy Regulatory Board which receives the petition of the oil companies to raise pump prices, hold public hearing before determining the allowable increase.
Under the deregulated regime, oil companies can adjust their prices based on market prices in the international market. -