Did oil deregulation spur competition? Review eyed

By Lenie Lectura - August 8, 2019

https://businessmirror.com.ph/2019/08/08/did-oil-deregulation-spur-competition-review-eyed/

SENATE Energy Committee Chairman Sherwin Gatchalian on Wednesday said he will file a resolution to review the 21-year-old oil deregulation law, following an injunction order issued by a local court against the Department of Energy (DOE) circular on the unbundling of fuel prices.

“Its about time to revisit [the law]. The promise of the oil deregulation law is more competition and that it will lead to lower prices. We should find out if we have achieved those now,”said Gatchalian, when asked to comment on the court order.

The Mandaluyong Regional Trial Court (RTC) Branch 213 granted last August 5 Petron Corp.’s application for a writ of preliminary injunction against DOE Circular 2019-05-0008 or the “Revised Guidelines for the Monitoring of Prices on the Sale of Petroleum Products by the Downstream Oil Industry in the Philippines.”

Among others, the circular requires oil companies to unbundle their price adjustments.

They should submit a report to the DOE with a breakdown of their import costs, tariffs, biofuel costs, oil company take components and other essential cost components that contribute to the changes in retail prices.

However, three local courts issued a Temporary Restraining Order. The Mandaluyong court, for one, granted Petron’s TRO application on July 15 against the implementation of the circular.

In granting the preliminary injunction, the court said it “again found clear and unmistakable right, which the petitioner was able to establish through evidence, to the provisional relief prayed for, to prevent the public respondent, the Secretary of the DOE, from implementing and enforcing the assailed DC while this court hears the main petition for Declaratory Relief so as not to render the judgment ineffectual.”

If the DOE circular is not restrained, Petron, said the court, might not be able to comply with its requirements. “The first of which is the submission of the weekly reports. At the same time, the petitioner might be placed at risk of losing its trade secrets and incur irreparable injury by disclosing such information to DOE.”

In so doing, Petron said it may be subjected to criminal prosecution and the administrative penalties cited in the circular for noncompliance with the same.

Gatchalian said he will file the resolution within the month. He said the review is meant to determine if the DOE, as claimed by the oil firms, has crossed the line.

The oil companies said the DOE circular contravenes the dynamics of a deregulated oil market. They said the Downstream Oil Industry Deregulation Act of 1998 authorizes the DOE to monitor both the international and domestic price movements of petroleum products, as well as the compliance of businesses with national standards.

“The DOE is doing this so that we can have transparency to achieve energy security and to make sure nothing disadvantageous to consumers is happening. The DOE should be able to know if the oil firms  are hoarding or not. or if the so-called industry take is done beyond reasonable terms. We need to understand the dynamics,” said Gatchalian.

Cusi: We’ll find ways

For his part, Energy Secretary Alfonso Cusi said Tuesday night that his office will “find legal ways” to carry out its mandate.

“We have to consult our legal team to determine the next step. We respect the court but that does not mean we will stop finding ways [to boost transparency]. That’s the oil firms’ right. They are exercising it, but I am not happy,” he said.

Another way to push for transparency in fuel prices amid the court order is to push through with the plan of Philippine National Oil Co.  (PNOC) or its exploration arm (PNOC- Exploration Corp.) to import fuel.

If and when successful, Cusi said the government would have a better understanding on how oil companies are able to price their petroleum products.

“We have never stopped,” said Cusi referring to the importation plan. There are just some technical issues involving some areas where the fuel would be sourced, if they can issue letters of credit. But we are working on this,” said Cusi.