Government sanctioned exploitation: Illegality of the automatic oil pricing mechanism in the downstream oil industry deregulation act of 1998
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ID: 286418
2019
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Abstract
The power crisis experienced by the Philippines in the early 1970’s decelerated the progress of national economy prompting the government to plan reforms and rehabilitation programs to resolve it. Former President Fidel V, Ramos revived the plans to liberalize the oil industry. In response, the Philippine Congress attempted to deregulate the downstream oil industry in 1996 through the passage of Republic Act. No. 8180, but the same was declared unconstitutional by the Supreme Court on 5 November 1997 on the rationale that it encourages an anti-competitive behavior among stakeholders in the oil industry, specifically oil companies engaged in the downstream oil industry, violative of Section 19, Article XII of the 1987 Constitution on which prohibits monopolies and combinations of trade or unfair competition. Congress again pursued the deregulation of the downstream oil industry by enacting Republic Act No. 8479 or known as the Deregulation of the Downstream Oil Industry Act of 1998 on 10 February 1998. It became effective on 14 March 1998. Finally, the downstream oil industry was fully-deregulated when Executive Order No. 471 was then enacted by former President Fidel V. Ramos. It was enacted to propel competition among oil companies in the local market which is dominated by the Big Three Companies such as Petron, Shell and Caltex (Big 3 Companies); and to remove from the government the burden of maintaining price subsidy due to the deficit of the Oil Price Stabilization Fund (OPSF). The deregulation law allowed the oil companies to set oil prices which was previously fixed by the abolished Energy Regulatory Board (ERB). In an attempt to question the validity of R.A. 8479 as a policy, the Supreme Court upheld its constitutionality and avoided trespassing on the powers of Congress and its wisdom on its enactment. However, it did not prevent the end-users or consumers and other militant groups to inquire on the law’s constitutionality and allege that the effects of the same runs counter from its purpose. Oil companies are accused of price fixing, through cartelization among Big 3 Companies, and the existence of asymmetry in oil prices. Apparently, the automatic oil pricing mechanism that is previously the function of the ERB is a major why the prices of oil since 1998 consistently increased, and it has been subject to abuse by the oil cartel to the detriment of the general public. Chapter 2 of this study will show the transition of the
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| Authors | Soledad, Alexandra G. |
| Journal | Malay Journal |
| Year | 2019 |
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| Keywords | Keywords not found |
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