Senate tackles proposals to amend oil deregulation law

Government control over fuel pricing?

MANILA, Philippines — The Senate energy committee under new chair Erwin Tulfo yesterday tackled bills to amend the oil deregulation law and give the government more control over fuel pricing.

Tulfo said the 1998 Oil Deregulation Law is outdated and in need of revisions to allow the government to have regulatory functions, instead of letting the oil companies dictate prices.

Senators seek to have better transparency in the downstream oil industry by requiring companies to disclose a breakdown of their pricing, including acquisition costs, operating expenses and profit margins per liter.

“I will ensure as chairman of this committee, while I am here, that we will review this law so that questionable pricing practices will not happen again – where the moment global market prices rise, gas stations immediately hike their prices the very next day,” Tulfo said in the inaugural hearing under his chairmanship.

“And when prices drop in the global market, it either takes months before the corresponding price cut is implemented or the reduction is incredibly small,” he added.

Senate President Sherwin Gatchalian, who had led the Proactive Response and Oversight for Timely and Effective Crisis Strategy (PROTECT) hearings to help the government address the US-Iran crisis, also attended the committee hearing.

Gatchalian said the government should have learned from the oil crisis and have some form of control over pricing, instead of giving the free hand to oil companies to make a profit.

Oil companies, he said, should stop their practice of charging replacement cost to the consumers by jacking up prices even though the fuel stock was bought using the previous lower cost.

“I recall that when oil prices surged, we conducted a hearing in the PROTECT Committee, which I chaired. Replacement cost became a major issue because we noticed that when oil prices increase abroad, fuel prices in our country rise very quickly,” Gatchalian said.

“However, when global oil prices fall, the reduction in local prices takes much longer,” the senate president said.

Gatchalian called for an end to the country’s dependence on imported oil, as he lamented that almost all of the Philippines’ oil supply is imported.

The country sources around 98 percent of its crude oil from the Middle East, according to the Department of Energy.

“The government should have a certain amount of power to regulate prices even though in a deregulated environment, and at the same time, be able to assure the public that prices are reasonable and monitored,” Gatchalian said.

Besides the oil deregulation law, the Senate panel also tackled the establishment of a strategic petroleum reserve.

Energy Secretary Sharon Garin said the government is in talks with the United Arab Emirates and Japan for the creation of a strategic oil reserve.

“This also gives us peace of mind that we can monitor prices because we will have our own oil that we can sell. But how long will it take to build? More or less, if we are only talking about one million barrels, we can always expand it later on,” Garin said.

The energy chief earlier estimated that roughly P30 billion would be needed to establish a strategic oil reserve that would provide at least an extra 30 days of fuel security during supply disruptions.

Tulfo supported the creation of an oil reserve, so that the country would not look like “headless chickens, running around all over the place, begging just about anyone” for oil.

“Let us ensure that we no longer have to worry when it comes to supply and prices. If we only had a reserve of a few million barrels, we wouldn’t be panicking. When will this actually become a reality?” Tulfo said.