Oil Deregulation in the Philippines

Topics: Petroleum, Peak oil, Monopoly Pages: 28 (8799 words) Published: December 1, 2013
An Assessment Whether
the Downstream Oil Industry Deregulation Act of 1998
Violates the 1987 Constitution

A Thesis Proposal

In Partial Fulfillment
Of the Course Requirements in
DOCULMG

2013
TABLE of CONTENTS

INTRODUCTION
Background of the Study .………………………………………………………………………... 3Statement of the Problem ………………………………………………………………………... 6 Objectives of the Study …………………………………………………………………….......... 8 Significance of the Study ………………………………………………………………………… 9 Scope and Limitations of the Study …………………………………………………………… 10

REVIEW OF RELATED LITERATURE
Competition Policy ……………………………………………………………………………... 12Transition from R.A. No. 8180 to R.A. No. 8479 ……………………………………………. 14
What People, Groups Say about the Oil Deregulation Law ………………………………. 21State of the Oil Industry Today ………………………………………………………………... 25

RESEARCH FRAMEWORK ………………………………………………………………………….. 35

BIBLIOGRAPHY ……………………………………………………………………………………….. 37

I. INTRODUCTION

A. Background of the Study

Contained in a November 5, 1997 Supreme Court decision, which deemed the first oil deregulation law, the Republic Act No. 8180, to be unconstitutional1, is a brief history of the Philippine oil industry.

Due to an oil crisis' occurrence in 1997, the government created the Oil Industry Commission (OIC) to regulate the goings-on of businesses working with oil. The OIC can fix prices of petroleum products, control refinery capacities, license new refineries, and regulate the general operations of affected businesses. The digest also pointed out the control of foreign companies over the industry, where almost every operations in the country at the time is owned by these companies. To break the foreigners' control, with President Marcos' initiative, the Philippine National Oil Corporation (PNOC). PNOC, operating as PETRON, was the first Philippine-owned Corporation in the market.

The Oil Price Stabilization Fund (OPSF) was then created,2 in 1984, as a buffer against the fluctuations in oil prices. Basically, the OPSF compensates by allowing companies to reimburse from the fund whenever prices change due to either exchange rate adjustments or world oil market prices.

Caltex, Shell, and PNOC, or Petron, were the only three remaining oil companies in the country came 1985.

Under the Cory Aquino administration, the Energy Regulatory Board (ERB) was created with the purpose of, much the same as the functions of the OIC, regulating operations of oil companies with the addition of paying the OPSF to recover the importer's expense from importing whenever there is petroleum product-deficit to temporarily adjust price levels, among others.3

Department of Energy (DOE) was created on December 9, 1992, with its focus to privatize energy-related government agencies, to deregulate power and energy industry, and to reduce oil-fired plants dependency resulting to Petron's privatization in 1993.4

In March 1996, Republic Act No. 8180, which is the law discussed in the Supreme Court decision, was enacted. This law aims to expel all government control over the oil industry and is to be done within two phases. Phase one, the transition phase which started in August 1996, aims to take away control over non-pricing related aspects while phase two, the full deregulation phase, now includes the pricing itself, which abolishes the OPSF. To make things official, six months after the first phase, President Ramos signed an Executive Order that fully deregulates the oil industry.

The passage of the bill incited protests from groups with the Bagong Alyansang Makabayan (Bayan). In October 1997, because of a strike, the Supreme Court issued a temporary restraining order (TRO) against the law and, eventually, deemed as unconstitutional in the decision being discussed earlier on.5

Its unconstitutionality was because of the violation against a Constitutional provision that states "the State...

Bibliography: Tatad v. the Secretary of the Department of Energy, G.R. No. 124360, Nov. 5, 1997
Lagman v
Garcia v. Corona, G.R. No. 132451, Dec. 17, 1999
H.B
Competition Policy, available at http://www.apeccp.org.tw/doc/Philippines/Competition/phcom1.html (last accessed Jul. 30, 2013)
GMA News, Militants set protests vs
Carla N. Canet & Teresa Ellera, Nullification of Oil Deregulation Law sought, available at http://www.sunstar.com.ph/bacolod/local-news/2011/09/23/nullification-oil-deregulation-law-sought-180970 (last accessed Jul. 30, 2013)
Rev
Richard Freeman & John Hoefle, LaRouche: Bankrupt Speculators With $25 Per Barrel Oil, available at http://www.larouchepub.com/other/2004/3123oil_speculation.html (last accessed Jul. 30, 2013)
F
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