In Lifting Price Cap, Arroyo, Oil Firms Mislead Consumers

Published on November 20, 2009

By ARNOLD PADILLA
Analysis
Bulatlat.com

MANILA — As expected, Malacañang lifted the freeze order it imposed on pump prices of oil in calamity-hit Luzon, just over three weeks after President Gloria macapagal-Arroyo issued the controversial Executive Order (EO) 839. It was actually a double whammy because she also ended the price control on basic goods such as rice, sardines, pork, meat, and others, which has been in effect since the country was placed in a state of calamity in early October.

The decision came on the heels of relentless pressure from the largest business groups and corporations in the country led by the so-called Big Three of the local oil industry to lift the price caps. Malacañang, in an attempt to make the public believe that it was not forced by powerful corporate lobbying, claimed that Mrs. Arroyo made the decision after the industry players agreed to her conditions.

These are: 1) the oil firms must provide some form of subsidy or discount in selected areas, particularly those hit by Ondoy and Pepeng; 2) the companies should recover their reported losses or adjust to changes in global oil prices on a staggered basis; and 3) the oil firms should increase their investments in the country to spur economic activity and create jobs.

Price Discounts

Such “conditions” are by no means a form of leverage for government or relief for consumers in calamity areas. On the first condition, oil firms have already been giving discounts in the past to counter the growing public outrage over unabated oil price hikes and overpricing. Discounts on few petroleum products and selected pump stations merely hide the overpricing of the oil companies.

The subsidies are also not at their expense because aside from overcharging, they just pass on the burden to consumers of other oil products and consumers in other areas. In some cases, they provide discounts as part of an overall marketing strategy such as loyalty programs and for market expansion. Pilipinas Shell, for instance, said that it will comply with the first condition set by Mrs. Arroyo through its Pepeng Pasada Club program – a reward system where motorists accumulate points and get discounts by gassing up at Shell pump stations.

Staggered Price Hikes

The second condition – that companies recover their supposed losses or adjust to changes in global oil prices on a staggered basis – is not unlike the previous appeals of Malacañang to the oil players. But since the industry is deregulated and the price freeze is now canceled, such a condition does not amount to anything. As soon as the price cap was lifted, Shell, Petron and other smaller oil companies announced an increase in the pump price of diesel by P2 per liter, gasoline by P1.25 to P1.50 per liter, and kerosene by P1.50 per liter. Shell and Petron’s liquefied petroleum gas (LPG) are also expected to jump by P22 per 11-kilogram cylinder tank. More increases are expected in the coming days as oil firms earlier claimed that they would need to recover as much as P5 per liter due to EO 839.

But why should they be allowed to recover their supposed “losses” in the first place? When EO 839 was issued, oil products were overpriced by around P5.48 per liter, even higher than what they claimed they lost during the EO’s implementation. Or even for the sake of argument we assume that there was no overpricing, still why should they be allowed to recover what they were supposed to absorb as a burden due to the state of calamity?

What happened under EO 839 is that Luzon consumers just simply “enjoyed” delayed price hikes, which they are beginning to take on now even if most areas have not even started to recover yet from the devastation of Ondoy and Pepeng. Worse, oil firms did not even lose a centavo during the entire implementation of the EO because they have been overpricing and because they have been passing on the burden of the Luzon price cap to Visayas and Mindanao consumers.

Nonsense

Mrs. Arroyo’s third condition – that oil firms should increase their investments in the country to spur economic activity and create jobs – in lifting the price cap is, to say the least, nonsense. Will she reimpose price control if an oil company is not investing enough and generating jobs? Such vague and impractical condition underscores how Malacañang’s “qualified” lifting of EO 839 is an undisputable triumph for the big oil companies, with the consumers and calamity victims at the losing end.

Certainly, consumers are not surprised with this turn of event. Malacañang’s sincerity and political will in protecting the general good and public welfare from the abusive and greedy oil firms are suspect from the onset. At the minimum, for instance, Mrs. Arroyo’s legal team could have challenged Shell’s petition before a Makati trial court asking for a temporary restraining order (TRO) and questioning the constitutionality of EO 839 but, instead, it preempted the court by lifting the EO.

What’s next for consumers?

Malacañang is threatening to reimpose an oil price control if oil companies will not follow the conditions outlined by Mrs. Arroyo. Government, however, has given up the high ground with its lifting of EO 839 and continued adherence to the discredited deregulation policy. Consumers thus must not rely on these empty threats of an undependable government and instead push through direct political actions for honest-to-goodness policy changes in relation to the oil industry.

There are practical and immediately doable alternatives to deregulation, such as imposing a centralized procurement of oil; reclaiming Petron; active state participation in refining, retailing and storage; maintaining an oil supply and buffer fund; conducting democratic public hearings before any oil price hike can be made; exploring commodity swap system and other alternative forms of oil trade, etc. And there are pending bills in the current Congress that aim to institutionalize these policy reforms such as House Bill (HB) 3029, which calls for the repeal of RA 8479; HB 3030 on centralized importation of oil; HB 3031 on the government buy-back of Petron.

The EO 839 issue at least brought to the fore many fundamental questions on the deregulation policy and affirmed many arguments why the market — especially an industry as strategic as oil and especially where a cartel operates — should not be left to itself. Many policy makers from both chambers of Congress have started to articulate anti-deregulation sentiments as a result of the controversy generated by the EO.

With the EO 839 saga now over and with the many issues it raised, there is an even more pressing need to popularize the people’s alternatives to oil deregulation and generate the broadest possible support for these policy reforms. (Bulatlat.com)