Tag Archives: Price of petroleum

[Press Release] Labor party calls for removal of VAT on oil to reduce prices -PM

Labor party calls for removal of VAT on oil to reduce prices

One day after the transport protest against the unabated increases in oil prices, the Partido ng Manggagawa (PM) called on the administration of President Benigno Aquino III to remove the VAT on oil products as an immediate measure to reduce prices.

“Noynoying at oil price hikes is unacceptable. Malacanang must assuage the public that despite movements in the international price of oil, the government has the menu of options to mitigate the impact of these price movements,” insisted Renato Magtubo, PM chair.

He added that the government must seriously consider demands for the removal of VAT on oil to mitigate the impact of oil price hikes which is expected to reach the 2008 level of P60/liter. The government collects twelve percent in every liter of oil products.

“It is unfortunate that Energy Department officials get elated with the news that there might be a ‘pause’ in oil price hikes this week while the fact remains that more than a decade since the oil deregulation law, the regime of higher oil prices has been pestering the lives of the workers and the poor,” Magtubo asserted.

The labor party added its voice in calling for the government to take decisive steps in stopping relentless hikes in oil prices. The group also asked the government to adjust the current level of wages by granting labor groups’ petitions for wage increase. Last Wednesday, PM and the Philippine Airlines Employees Association picketed the Petron headquarters in Makati City.

“Raising the consumers’ capacity to buy is also an option. Thus, a new wage order at this point in time must be issued by the government,” Magtubo explained.

The group is open to supporting all means to raise wages from the petition filed by the TUCP at the regional wage boards to a legislated wage hike bill filed in Congress by militant lawmakers. ###

Press Release
Partido ng Manggagawa
March 16, 2012
Contact: Renato Magtubo @ 09178532905

[Featured Photo] Protest against oil price hikes -GMA News

During a halt in traffic, militant youth groups occupy a pedestrian lane along España Avenue on Thursday to protest against oil price hikes. Meanwhile, jeepney drivers and supporters gathered in various parts of Metro Manila for a transport caravan. Danny Pata Source: GMA News

Photo extracted from : http://www.gmanetwork.com/news/photo/16905/along-busy-pedestrian-lane-youth-groups-protest-vs-fuel-hike

[In the news] Bayan, KPMM’s protest vs oil price hike set March 15 | Sun.Star

Bayan, KPMM’s protest vs oil price hike set March 15 | Sun.Star.

March 13, 2012

A PROTEST action against oil price hikes and overpricing of petroleum products will be conducted by the Koalisyon ng Progresibong Manggagawa at Mamamayan (KPMM) and Bagong Alyansang Makabayan (Bayan) on Thursday, March 15.

The KPMM has earlier denounced the government’s utter insensitivity to the plight of ordinary Filipinos who face the brunt of weekly oil price increases.

The coalition, through organized multi-sectoral efforts, warned the government of looming “summer storms” to protest government inaction on the people’s clamor to reduce oil prices.

“The Aquino administration has been obviously sleeping on the job. While the President exerts too much effort with his own crusades and shady motives behind the Corona impeachment trial, he conveniently forgets that justice must also be served to Filipinos who are everyday swindled by the Big 3 oil companies through overpricing,” said Larry Tan, KPMM spokesperson.

Read full article @ www.sunstar.com.ph

[In the news] Lawmaker urges Congress to pass oil profit cap bill – The Daily Tribune Online

Lawmaker urges Congress to pass oil profit cap bill

January 30, 2012

 In the midst of the ongoing impeachment trial at the Senate, Sen. Antonio “Sonny” Trillanes IV has reiterated his call for his colleagues in the Senate and the House of Representatives to immediately pass a bill setting the allowable level of profit for petroleum companies and imposing windfall profit tax on oil firms.

“With the oil prices continuously increasing almost on a weekly basis, the government is virtually helpless in checking the apparent abuses of petroleum industry players in increasing and in refusing to decrease prices of petroleum products even when warranted by market forces. This is aggravated by the lack of transparency in the formula used by petroleum companies in order to arrive at their prices,” Trillanes said.

Read full article @ www.tribuneonline.org

[In the news] ‘Meager’ oil price rollback slammed – InterAksyon.com

‘Meager’ oil price rollback slammed
by Abigail Kwok, InterAksyon.com
January 23, 2012

 MANILA, Philippines – The militant transport group Piston (Pagkakaisa ng mga Samahan ng Tsuper at Operators Nationwide) slammed what it called a “meager” oil price rollback from oil firms and warned of more protest actions in the coming days.

In a statement, Piston national president George San Mateo said the P0.80 per liter rollback in diesel and P0.20 per liter rollback in gasoline prices were small compared to the total increase of P2.70 per liter for diesel and P3.20 per liter for gasoline at the start of the year 2012.

Read full article @ www.interaksyon.com

[In the news] Fuel prices up by P1 plus – InterAksyon.com

Fuel prices up by P1 plus
by Abigail Kwok, InterAksyon.com and Michelle Orosa, New5
January 11, 2012

 MANILA, Philippines — (UPDATE – 11:46 a.m.) A new round of fuel price hikes Wednesday prompted the activist transport group Pagkakaisa ng mga Samahan ng Tsuper at Operators Nationwide to launch protest actions against oil firms.

Early Wednesday, Petron Corp. and Chevron Philippines increased their diesel, gasoline and kerosene prices by P1 per liter while Pilipinas Shell hiked prices of its own products at noon.

Eastern Petroleum, meanwhile, increased gasoline prices by P1.75 per liter and diesel by P1.50 per liter.

Some 20 members of Piston staged a rally at Shell’s head office, lying down on the street, to condemn the price hikes.

Read full article @ interaksyon.com

[Statement] Rejection of Petron’s offer to sell refinery – PMT

Aquino completely misses the point on Petron offer

Last week, in a “surprise” move, Petron offered government to repurchase the oil firm’s refinery in Bataan. In a letter to the Department of Energy, Petron Corp. chairman Ramon Ang made the proposal in order for government to have the means to address the issue of rising fuel prices. He likewise made their retail stations available for re-sale if deemed necessary.

Pnoy has rejected the offer. Saying “at this point in time it will not be in the best interest to people if government were to re-run Petron.” He also added “it will only lose money” and “inefficient pag government nagpapatakbo something that has purely business applications.”

Pnoy completely misses the point. He was outclassed by Ang. And once again, his impromptu statement exposes his utter incompetence and insincerity in addressing the issue of rising oil prices.

The reversal of Petron’s privatization is neither about business nor profit.

A government controlled Petron will not lose money if managed professionally. The practice of turning government corporations into appointees’ playgrounds and milking cows must be stopped.

Petron controls 38% of the local market. Petron’s refining capacity is 180,000 barrels per day.

Control over this company will allow government to check the unscrupulous practice of oil firms in implementing oil price hikes, overpricing and price manipulation. A State Operated Enterprise (SOE), such as this case, will not be operated on the basis of profit-making like any other business, but of social welfare maximization.

By this, Petron in government hands must be made to assume the lead in the local oil industry in terms of pricing, quality and technology. It should offer consumers the most reasonably priced, high-quality and environmentally-sound fuel products.

Regaining control of Petron will surely put government in a better position to formulate and develop a comprehensive oil industry program with the end of serving the welfare and general interest of the Filipino people.

October 14, 2011
Dante Lagman, PMT President

[Statement] On the creation of DOTC-DOE-DOJ task force: Government action or ploy? – PMT

Reacting to the nationwide protest actions spearheaded by transport groups held Monday, Transportation Secretary Mar Roxas announced the creation of a tri-agency task force to look into the pricing scheme of oil companies to determine if there is truth to suspicions they work as a cartel to control prices of oil in the country. Along with the Justice and Energy department, the task force will investigate complaints of overpricing and determine if price increases were just and reasonable.

“We find this announcement very suspicious. Was it meant to address the grievance raised by transport workers on oil prices or just another ploy to deceive us and the public?” said Dante Lagman, President of militant transport group Pagkakaisa ng Manggagawa sa Transportasyon (PMT).

On September 14, 2011, the Pagkakaisa ng Manggagawa sa Transportasyon (PMT) filed a complaint with the DOJ. They want oil companies, particularly the Big 3 (Petron, Shell and Caltex), to be prosecuted and penalized for collusion, overpricing and price manipulation.

“In our complaint, we asked the DOE-DOJ task force to act within the 30 day mandatory period. This task force is a mechanism created by the Oil Deregulation Law (ODL) to check abuses by oil companies, contrary to claims by government that they are powerless against patently unfair and unreasonable oil price increases. The wisdom of the 30 day period guarantees swift and decisive action to arrest the exploitative nature of the oil oligopoly. It’s just that this remedy was never exercised. Government opted to protect the interest of oil companies over the masses.” stressed Lagman.

“We fear that the tri-agency of Roxas aims to once again circumvent the law.It is a ploy to let the masses think that PNoy administration is doing something to solve the problems of the country. Worse, it will rule in favor of the oil companies and proclaim that deregulation can still work.”

“The PNoy administration should stop being an accomplice to unjust profiteering by oil companies. It should instead listen to the demands of its people – substantial roll back of petroleum prices, punish oil companies, remove the VAT and repeal the Oil Deregulation Law.” concluded Lagman.

PagkakaisangManggagawasaTransportasyon (PMT)
Dante Lagman

[Press Release] Which is worse? The inability to paralyze transport or government inaction to the pleas of the people? – PMT

A question for MMDA Chairman Tolentino and Spokeperson Lacierda:

Which is worse? The inability to paralyze transport
or government inaction to the pleas of the people?

Palace spokesperson Lacierda and MMDA Chairman Tolentino are in a chorus. They say that the so-called transport strike was a “dud” because it failed to paralyze transport in the country.

But which is worse? The failure to paralyze transport? Or government failure to address spiraling oil prices and its paralysis on the people’s demand for oil regulation, a bigger and substantial rollback, and the removal of VAT on petroleum products?

Infinitely much worse is a government that is a willing and able accomplice to unjust and immoral profiteering by the oil industry. A government, which does not lift a finger to bring down oil prices because it collects more taxes, through VAT, in as much as prices increase in a deregulated market.

Was the recent “transport strike” a success or a failure? How do we measure a success of a strike (be it in transportation or in factories)? First, a strike must be able to paralyze the operations of a business. Second, as a consequence of the stoppage in the circulation of capital, the management gives in to the demands of the strikers, which could either be a partial or full concession to them.

Using these two conditions, we could say that the so-called “strike” was a failure. Even before September 19, the PMT knew that organized groups in the transport sector have not mustered enough strength and conviction to paralyze transport. In so doing, we called for a nationwide protest, not a strike, for the regulation and control of the oil industry.

This “mistake” of PISTON and Mateo is not a costly one; and could be justified. They probably used the term “transport strike”, more for propaganda than an actual call to paralyze transport, in order to highlight a just and moral demand that needs more attention in the mainstream media.

However, we openly declare that the so-called “transport strike” was a success. It popularized, on a nationwide scale, the demand to remove VAT on oil prices and to control oil prices. Because even the commuting public viewed the protests not as a nuisance but a legitimate expression of their discontent and disgust against the scandalous profiteering by oil companies.

Hence, we view the nationwide protest as a “break in”, a warm-up for an actual paralysis of transport in the coming period. More so, because oil companies had the gall to grant a pittance after today’s protest.A mere twenty centavo (P.20) per litter rollback, which further stokes the discontent of the Filipino people.

Along with Lacierda and Tolentino, the oil oligarchs are provoking the people to rebel against the system. However we will not pursue an “inciting to sedition” case against them. If they would continue to ignore the people’s desperate plea to control oil prices, they would have their day and we will give them want they want! #

Pagkakaisa ng Manggagawa sa Transportasyon (PMT)
Dante Lagman

[Press Release] CWS supports the people’s protest vs. oil price increases

The Church People-Workers’ Solidarity (CWS) calls on government to listen to the demands of the transport and other groups launching a transport strike against high oil price increases, saying that the people have a right to protest, “to participate in social and economic life” and to work for the common good (cf. Compendium of the Social Doctrine of the Church, 333).

Quoting the  Church’s social teachings,  Jaro Auxiliary Bishop Gerardo Alminaza, one of the convenors of CWS said that “governments must work for the realization of the common good. It has also the duty to protect the rights of all its people, and particularly of its weaker members, the workers, women and children. (Blessed John XXIII’s Mater
et Magistra, # 20)”

“Oil price has increased more than 20 times since January 2011, and this is causing added burden not only to drivers and operators but to workers, peasants, fisherfolks, and their families.”

Transport groups are calling for P9.00 per liter rollback of price of all oil products, as overpricing in oil prices since last year has reportedly reached to P9.00 per liter as a result of the monopoly of the Big 3 (Shell, Petron and Caltex) and the government’s deregulation

“In a situation where workers receive very little wages, the unabated oil price hikes erode the value of our workers’ income since prices of basic commodities also shoot up. The effect is far worse for workers whose jobs and income are both irregular.”

Ibon, an independent research institution, says that increases in oil prices are driving inflation.

Bishop Alminaza is also concerned of reports that both oil companies and the Philippine government are raking in billions in profits and revenues at the expense of the ordinary consumers.

According to Ibon Foundation, the profits of the oil firms since 2001 have  totaled to P141.7 B in 2010.

The Philippine government has also been getting revenues of P48 billion pesos annually or a total of P239.6 B in the last five years due to the 12% VAT on oil, according to a study by Ibon.

“Profit at the expense of the poor is immoral and unjust. The Church is very clear in its teachings that the well-being of our toiling brothers and sisters should come first before profit. Government must regulate oil industry  to moderate the greed of private oil firms.
The welfare of the majority must be prioritized,” Alminaza added.

Alminaza said the government must heed the calls for the review of the oil deregulation policy and for the removal of VAT on oil products.

A legitimate strike

Meanwhile, Garry Martinez, spokesperson of the CWS, also reacted to the threat of Malacañang and PNP that they will arrest  those who will join the transport strike.

“The transport strike is a lawful exercise of a constitutional right to freedom of expression and of assembly. It is a legitimate form of action of the people, so that those in power will be able to listen to the people’s demands,” Martinez said.

“The Aquino administration must show the political will to stop the big oil companies from imposing unreasonable prices.  The proposed extension of pantawid pasada program (PPP) which Aquino promised to prevent transport groups from staging the strike is not the solution. The PPP budget of P450 million is not even 1% of the government’s annual revenue from VAT on oil. The transport sector together with the people must be firm in its calls to rollback oil prices, to end the control of the oil cartel and remove VAT on oil.”###

Bp. Gerardo Alminaza, Convenor CWS
Gary Martinez, Spokesperson CWS, 0939-3914418

[In the news] Militant youth group in Davao fears new fare hike – www.sunstar.com.ph

Militant youth group in Davao fears new fare hike

MANILA — The continuous oil price increase would definitely result in another fare hike and higher cost of prime commodities, a militant youth organization warned Saturday.

Petron and Shell implemented another round of increase on Friday following a recent uptick a day before. Chevron and other gas retailers, meanwhile, are expected to follow suit.

“Drivers and the public, including the youth and students, will definitely bear the brunt of higher price of oil as it will trickle down to the price of prime commodities and fare,” said Anakbayan-Southern Mindanao spokesperson Cherry Orendain.

Read full article @ www.sunstar.com.ph

[in the news] Youth militants protest oil price hikes in Davao – www.sunstar.com.ph

Youth militants protest oil price hikes in Davao

MANILA — Militant youth groups on Friday held a protest action in Davao City following the series of price increases on various oil products.

Series of oil price hikes are being implemented by the three big oil firms (Petron, Shell and Chevron) on Friday, 35 centavos for unleaded gasoline and 50 centavos for regular gasoline, respectively.

These are the 20th oil price increase for this year and the 31st since President Benigno Aquino III took power in June 2010.

Read full article @ www.sunstar.com.ph

[In the news] Transport groups paralyze Southern Luzon over oil price hikes- InterAksyon.com

Transport groups paralyze Southern Luzon over oil price hikes
Abigail Kwok, InterAksyon.com

MANILA, Philippines – (UPDATE – 6:09 p.m.) Militant transport groups on Wednesday said they had paralyzed commuter traffic in Southern Luzon Wednesday as protests were staged elsewhere across the country to demand a major rollback in fuel prices and the scrapping of the Oil Deregulation Law.

In Bicol, the Concerned Drivers and Operators for Reform, the regional affiliate of the Pagkakaisa ng mga Samahan ng Tsuper at Operator Nationwide, claimed to have totally paralyzed public transport in the region, except for Masbate City, from as early as 9 a.m.

Condor chapters placed the transport paralysis at between 85-100 percent in the different Bicol provinces.

Read full article @ www.interaksyon.com

[In the news] Bayan demands P8-P9 oil price rollback – InterAksyon.com

Bayan demands P8-P9 oil price rollback
Abigail Kwok, InterAksyon.com

MANILA, Philippines — Militant group Bayan (Bagong Alyansang Makabayan) joined various groups in a mass protest against high fuel prices on Wednesday, reiterating calls for an P8 to P9 rollback and for government to regulate oil and stop the weekly price increases.

In a statement, Bayan secretary general Renato Reyes Jr. said oil price increases were “artificial and oppressive,” citing a cable from whistleblower website WikiLeaks that oil producers in Saudi Arabia are finding it difficult to find oil buyers supposedly weak demand.

Despite this, oil prices were still increasing.

Read full article @ www.interaksyon.com

[Blogger] Politics for Breakfast: Setting Fair Oil Prices for the Filipino People (by Rep. Walden Bello)

Politics for Breakfast: Setting Fair Oil Prices for the Filipino People (by Rep. Walden Bello).

by James Miraflor
Politics for Breakfast

Just this Monday, Rep. Walden Bello, a progressive Filipino solon, world-renowned economist and the originator of the “deglobalization” movement, recently spoke in halls of Congress on the need to set fair oil prices and increase income in a time of inflation. A series of urgent demands for relief, Bello’s proposals perfectly complements Pagkakaisa ng Manggagawa sa Transport’s (PMT) strategic and medium-term “Proposals to End the Recurring Oil Crisis”

This is a must-read for policy-makers who are considering a lasting but feasible urgent solution on the oil inflation problem. Enjoy!


Setting Fair Oil Prices for the Filipino People
Privilege Speech of Rep. Walden Bello, May 16, 2011

Rep. Walden Bello. Politics for Breakfast

Rep. Walden Bello. Politics for Breakfast

A year after its election, the administration can point to the high economic growth rate, particularly in agriculture, as one of its achievements.

However, perhaps more than economic growth, people prize economic stability, and the way things are going right now, there is a sense of things slipping out of control. The main challenge citizens want the administration to meet is, far and away, the economy.  And among the economic issues, inflation receives the highest priority as a problem that must be addressed by the government in a recent Pulse Asia survey, with some 53 per cent of respondents citing it.

A key factor that contributed to the unpopularity of the previous administration was the duet of uncontrolled rise in fuel prices and food prices in 2007-2008. The same scenario of unrestrained ascent of food and fuel prices threatens to repeat itself in 2011.

What is unraveling things is the rapid rise in the price of oil, which induces an inflationary effect on all other goods, including food, the price of which is greatly determined by oil-intensive transportation, refrigeration, fertilizers, and pesticides. In the last four months, the oil majors have raised prices six times, increasing the price of gas by P10.25/liter since January. Gasoline prices now range from P53.95/liter to P60.22/liter with a common price of P56.95/liter.  True, there have been slight rollbacks during the last two weeks, but this is a case of one step backward and two steps forward on the part of the oil majors, who are wary of rising public resentment.

There is one attitude that the administration cannot afford to project in this crisis, and that is the sense that it cannot do much about the rise in prices. A non-interventionist strategy is political suicide, as the previous administration learned in 2007-2008.  An attitude of we can’t do anything because that’s what the market says or because the oil companies will only shut off their supply if we try to tamper with their profits will not fly with the public, whatever the ill-conceived Oil Deregulation Law says.  People want to have a sense that their government is doing something pro-active, that it is in control of events.  After all, that is why they elected the administration to power in the first place: to effectively manage things in the public welfare.

Yet this sense of fatalism is what has been projected by recent statements by Energy Secretary Rene Almendras who said that addressing the rising price of oil must take a backseat to assuring oil supply because “What can we do when the oil companies tell us they want to back out?”  The same sense of helplessness has been transmitted by Senate Energy Committee Chairman Sergio Osmena III, who recently stated, “There is no law dictating prices (of oil products), that is why there is no overpricing to talk about. If they (oil firms) want a huge profit, we cannot stop them.”

President Aquino must reject such fatalism from his subordinates.

Causes and Dynamics of the Oil Price Rise

The price of crude has risen from some $33 a barrel two years ago to $116 a barrel currently.   The long-term rise in the price of crude has been traced to the combination of a limited supply of oil owing to few new discoveries of significant oil fields and a growing market owing to the emergence of dynamic new markets like India and China.  In the short term, however, the skyrocketing of oil prices has been sparked by heated speculation on oil futures, that is, by speculators betting on the price of oil rising, and this act itself contributes to the price rise.  While the political developments in the Middle East may have contributed to some disruption in supplies, this is very minor and certainly does not explain the massive rise of over 400 per cent in the crude price.

Now, while transnational oil giants may not be the main instigators of this process, they are benefiting from it.  In the last week of April, the world’s six largest publicly traded oil companies (among which are the mother companies of two of the oil operators in the Philippines) reported a combined $38.1 billion in first-quarter profits owing to the rapid rise in the price of crude.

Breaking the Price Spiral

But while oil TNCs may not be the prime movers behind the oil price rise, they can stop it.  The same thing can be said about the oil producers, that is, the Organization of Petroleum Exporting Countries (OPEC). How?  By simply acting in concert to stop the rise in the pump prices and the crude price.  This will break the price spiral and serve as a signal to the speculators that the party is over, drive them from playing in oil futures, and rapidly bring down the price of oil.

Herd behavior is behind the speculative rise in oil price, and what is needed is a firm signal that would drive the horde of speculators in the other direction.  One of the key factors that drove the herd in the other direction in 2008-2009, when oil prices crashed from $148 a barrel to $33 in slightly over six months was global recession, of which the oil price rise had been a major cause.  If there is anything that can be learned from that crisis, it is that we cannot wait for recession, with all its painful consequences, to serve as the command for the speculative herd to retreat.

Allowing the prices to continue to rise threatens not only consumers but business.  While people may think businesses can simply pass on the rising costs to consumers, it is not that simple.  During the 2007-2008 oil price rise, Philippine Air Lines passed on price increases to passengers.  But its effort to assure its oil supplies to maintain its profits led to it making futures contracts at inflated prices that led to massive losses when the oil price collapsed.  Even the oil giants suffer the consequences of unregulated price rises: like PAL, Petron lost four billion pesos from forward hedging deals when oil crashed in 2008.  Nobody’s interest except that of the speculators is served by uncontrolled inflation.

Need for a Comprehensive Strategy

What is needed is a comprehensive strategy not only to blunt the impact on both the consumer and business of the rise in the price of oil but one that would frontally tackle the root cause of the crisis itself.  So far, proposed solutions, while useful, have been advanced in a largely piecemeal fashion, and these have been defensive and of limited impact.  Allow me first address the measures that the administration has taken so far.

Wage Increases

Raising the basic wage is critical to helping workers and their families contain the rapid erosion of their living standards.   In this regard the increase in the Emergency Cost of Living Allowance (ECOLA) (by 22 pesos in the National Capital Region) by the Regional Wage Boards will have minimal impact in terms of reversing negative trends. The National Wages and Productivity Commission (NWPC) must accompany the ECOLA with a minimum increase of not less than P100 in the basic wage.

Targeted Subsidies

Like wage increases, “targeted subsidies” are a good idea.  However, the current scheme mandated by Executive Order 32 appears to be, as Business World puts it, “hardly more than political gimmickry.”  The present initiative, which gives a 1050 peso subsidy for jeepneys and 300 pesos for tricycles, has two problems.  The first is that it mainly benefits the owners of jeepneys and tricycles because it awards the cards only to owners who can produce the franchise, original registration certificate, and route designation.  The owner would merely calculate the 1050/300 peso into his “boundary,” and this would amount of two days worth of owner’s income in one month.  The second is that the amount is too small, now being a one-time 1050/300 peso subsidy.

A more effective approach would be for the administration to 1) set up an ID system that would allow jeepney and tricycle driver to claim and calculate the 1500/300 pesos into their boundary; and 2) commit to renewing the subsidy every three months should oil prices continue to rise.

Suspending or Eliminating the VAT on Oil Products

Eliminating or temporarily suspending the Value Added Tax (VAT) on oil products was recently mentioned as a possibility by Secretary of Finance Cesar Purisima.   This is a positive suggestion that could result in significantly lower prices and thus benefit the consumer.  A balanced must be achieved, however, between the benefit to the consumer and the loss of tax revenue, as some have suggested.  Also, there must be an effective method to ensure that the suspension of VAT is being reflected in the pump price.

On the first issue, benefiting the really needy while moderating revenue loss can be achieved by having the VAT exemption limited to tricyles, jeepneys, commuter FXs and taxis.  On the second concern, to ensure that oil companies will not pick up the slack in prices from the vat exemption, one can have the tax exemption reflected in the receipt, which will give consumers a clear way to differentiate and monitor changes in oil prices and the application of the VAT exemption.

The Need for Flexible Price Management

Intervening in some way to contain the rise in the price of oil cannot be avoided in any viable solution, and this course of action will necessitate more than the Department of Energy examining the books of the oil giants, as suggested by Reps. Rufus and Maximo Rodriguez.  But before forceful intervention on prices can take place, one must convince people like Energy Secretary Almendras and Senator Osmena that their fears of the oil majors withdrawing from the Philippines are groundless.

These two gentlemen simply unwittingly repeat the threat of the oil majors when they perceive the threat of price controls.  First of all, being now a majority-Filipino-owned company, Petron has, for all intents and purposes, nowhere else to go but the Philippines.  As for Chevron Caltex, it has been uttering the threat of withdrawal for some time now, yet it stays.  The reason leaving the Philippines is an empty threat is that no one withdraws from a very profitable market owing to temporary dips in profitability.  Should one of the oil majors withdraw, that would translate into the two others taking over its market share, with increased profits from increased sales volume.  Should the three, in a display of collective solidarity withdraw, there are many smaller, independent companies that would come in to fill the demand.  In a competitive world where participants see every normally profitable market as vital to long-term profitability, no one would think of voluntarily yielding market share.

Is there empirical evidence for this claim?  In late 2009, when there was a temporary freeze on the price of oil owing to Typhoon Ondoy, none of the oil majors withdrew, though they complained loudly.  Why?  Because the market was so profitable that they, the majors, still recorded significant profits. According to Petron Corporation, the company posted a net income of P4.3 billion in 2009.

Pushing the oil majors to moderate prices is one key part of the solution.  Convincing the oil producers, that is, the Organization of Petroleum Countries, is another.

To motivate the oil majors and OPEC to take steps to break the speculative spiral will require government action at both the national and international level.  At the international level, one course of action is, as suggested by the UN, to have oil-consuming countries negotiate a benchmark “fair” cost of oil with the Organization of Petroleum Exporting Countries and limit price movements within a band.  At the national level, the government can impose price controls on the pump price of gas and diesel.

Before we go any further, let me say here that I agree with Rep. Antonino of Nueva Ecija’s assertion in his privilege speech last week that there is no strategic solution to the energy crisis except to promote renewable energy.  I think we should start now to reduce our dependence on fossil fuels by seriously implementing the Renewable Energy Act.  We have, however, to deal with the short-term, because, as the economist John Maynard Keynes said, unless we do so, “we are all dead.”  And the short run is the reality of the oil price rise that is crippling our people.

Elements of a Flexible Oil Price Management Program

The following proposal proposes the establishment of a flexible price-setting mechanism and complementary measures to ensure its effective operation.

1. Fair Oil Price Setting Mechanism

Government must establish an oil price setting mechanism that will keep oil prices within a range or band that is fair and affordable to consumers, while allowing oil companies a reasonable level of profits. The range of the price band should be computed based on three main factors, namely: the purchasing capacity of consumers (e.g. based on a predetermined maximum allowable percentage share of oil based expenditures to total household expenditure) an approximation of a fair and reasonable level of profit for oil companies, and the prevailing prices of oil in the international market.   The price band must be reviewed and reset on a monthly basis.

President Aquino must create a committee that will set and review the price band.  The committee should be headed by the Department of Energy, and should be composed of representatives from oil companies, consumers’ groups, and three independent experts.

Should the monthly balance sheet of the oil corporations reflect a loss, the government will not be held accountable for reimbursing this loss.  Should the balance sheet reflect a more than moderate rise in profits—say 10 per cent or above—this sum should be subjected to a windfall profits tax.

2. Setting up a Strategic Oil Reserve

To protect itself from price and supply volatilities of oil in the international market, government must seriously consider building oil reserves as a strategic objective, a proposal that has also been suggested by Secretary Almendras. Establishing a strategic oil reserve will help provide government the capability to cushion oil consumers from the vagaries inherent in the oil market, and also provide it with the necessary stocks to influence prices .

President Aquino must direct the Department of Energy to create a blueprint for the establishment and management of such reserves, including identifying sources of funding for building the country’s oil stocks. The DOE can look at tax revenues from oil companies as possible sources of funding for the creation of the said reserves.

Establishing an oil reserve might require legislation, but it would be best if the initiative can be put in motion immediately by invoking the charter of the Philippine National Oil Corporation (PNOC).

3. Strategic plan to regain control of Petron

President Aquino must begin developing a medium-term plan to regain control of Petron, as a strategy to increase government’s capability to intervene in the market and break the oligopolistic tendencies of oil companies. Petron’s share in the domestic oil market is at 38.6%, giving it the clout to effectively lead and influence oil prices.

Regaining control of Petron can be achieved by government buying back at least 51% of Petron shares, or by a combined action of acquiring a substantive share of Petron and maximizing government participation in the SMC Board, which now controls the oil company.

The President must direct the Department of Finance, the Department of Budget and Management and the Department of Energy to lead this planning process, in consultation with relevant members of the Cabinet.

While this process is in motion, the administration must exercise “moral suasion” on Petron, which is now majority Filipino-owned, to serve as a price-setter.  Industry insiders still see as a model of effective moral suasion the pressure exercised by former President Joseph Estrada’s Energy Secretary Mario Tiaoqui in keeping down prices.  These tactics included the threat of imposing negative sanctions.

Separate but related to these considerations is the issue of who controls Petron at present.  If the persistent news that Petron has fallen under the control of a predatory family is indeed true, then it is all the more important for the government to put in motion a process of regaining control of the firm.

4. Support UN Advocacy for International Oil Price Controls

The Philippines must support the United Nation’s call for an international negotiation to determine a fair cost of oil, and to limit international oil price movements within a certain band.  However, this should not be a conference limited to OPEC and the G 20 but a UN-sponsored meeting bringing together all oil-consuming and oil-producing nations.

The President must call on the Department of Foreign Affairs and the Department of Energy to look at how the Philippines can relay and actualize it support to UN. The DFA can also look at the possibility of the Philippines bringing this as an agenda in the next ASEAN Summit in September this year.

Legal Considerations

Before we move ahead with this program of flexible oil management, we must address the objection posed by the representatives of the oil companies.  Is not the government powerless to act owing to the Oil Deregulation Law (Republic Act No. 8479)? The answer is no.  The president can invoke Section 14 e of the law as the former administration did, under popular pressure, with EO 839 on Oct 23, 2009, to protect consumers against predatory pricing by oil companies in the aftermath of Typhoon Ondoy.  Section 5 e reads: “In times of national emergency, when the public interest so requires, the Department of Energy (DOE) may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any person or entity engaged in the industry.”

By any definition, a situation of unregulated, sharp price increases at the pump brought about by a more than 400 per cent rise in the price of crude in two years, which sparks inflation and brings an economy to the edge of recession at the same time, qualifies as an national emergency.

However, to enhance the effectiveness of temporary government intervention, it will be necessary to amend the Oil Deregulation Law. In other words, Congress must review and amend RA 8479 with the goal of introducing provisions that will (1) instititutionalize flexible intervention in the market to protect the interest of retail oil consumers (2) integrate the purchasing capacity of consumers as an important factor in considering the operation of the Automatic Oil Pricing Mechanism, (3) formally define a condition of national hardship brought about by extreme oil price volatility as an emergency, and (4) better monitor and ensure the compliance of oil companies in providing reports on, among other things, oil price and supply as well as revenues to the Department of Energy.


The foregoing program, which combines subsidies and tax reductions with mechanisms to moderate the rise in the price of oil, if implemented with sensitivity cum determination, will achieve two things: 1) it will significantly slow down the erosion of people’s living standards by lowering inflation; and 2) it will eliminate the chaos induced by oil prices that rise arbitrarily and thus allow households and firms to more rationally plan their production and consumption.

That there is no smooth road to containing the drastic rise in the price of oil brought about by uncontrolled speculative activities is a stark reality. There might even be threats of supply price disruptions on the part of the oil majors.  Such threats must, however, be expected from them.  Carrying them out is another thing, for this will cross the line to illegality, and the oil majors will find it difficult to take this course on pain of courting both popular condemnation and legal action from the government that would significantly affect the future profitability of their operations in the Philippines.

The flexible price-setting mechanism and its associated components outlined above are reasonable. They will not harm the oil majors’ interests; they will simply encourage them to be satisfied with moderate profits, while pushing them to take action to break the speculative price spiral that harms both their interest and the interest of consumers and business.

But while reasonable, these measures will provoke much lightning and thunder from the oil majors and their propagandists.  On this issue, political will will be demanded from the president.  He has shown this in addressing other challenges.  I am confident he will show it in this instance as well.