AS prices soar amid Russia’s invasion of Ukraine, Malacañang called on Congress to review the oil deregulation law to give the government the power to intervene whenever there are oil price hikes.
A House leader promptly proposed a four-point amendment to the Downstream Oil Industry Deregulation Act to enhance competition in the fuel sector, but a minority lawmaker challenged the Palace to certify the amendatory bill as urgent so it can hurdle Congress soon.
Acting Presidential Spokesman and Cabinet Secretary Karlo Nograles made the appeal on Wednesday as the Palace called for the “early and peaceful resolution” of the Russia-Ukraine crisis which he said has “economic, trade, and human resource implications for our country and for our people.”
Responding to Malacañang’s request, the chairman of the House Committee on Ways and Means, Albay Rep. Joey Sarte Salceda, said his office is now drafting the proposed measure and will submit his version to the House leadership and to the Palace for the Department of Energy’s possible adoption as the administration version of the amendments.
“The most important component of my proposal will be creating a strategic petroleum reserve that the government would stock during periods of abnormally low prices. This would help ensure adequate supply at affordable domestic prices during periods of high world market prices. When price increases are artificial or due to collusion among players, it will also help the state pop such bubbles,” he said.
The second component requires the unbundling of retail prices of fuel, said Salceda.
“I was pushing the Department of Energy to give us similar data last year, although their ability to really do this is limited because there is no legal requirement for fuel companies to unbundle prices,” he said.
According to Salceda, the third component of his proposed amendments require sall fuel outlets to update any change in retail prices in a central government database for efficient monitoring, to “allow us to monitor and act on abnormal price changes.”
Price transparency comprises his fourth component.
“The database that retailers will update will be made available and presented in an easy-to-navigate format for the consuming public, so that they can make informed decisions about their purchases. That will also help undercut abnormally high prices,” he said.
“The strategic petroleum reserve will be especially crucial because oil is a very cyclical commodity. When oil prices rise in the global market, there really is very little you can do except release more supply. So, when oil prices are very low, we have to be countercyclical and actually buy more fuel, so that we will have spare supply to release during periods of high prices,” Salceda explained.
5-point plan amid Ukraine invasion
EARLIER, Salceda proposed a five-point plan to respond to the threat of rising oil prices amid the conflict between Russia and Ukraine.
He warned that world crude prices could reach $ 130 per barrel if the war drags on and Russian oil exports are sanctioned.
“First, we need to draw a line on the sand in terms of the fuel excise tax. If crude oil prices are still at $100 by March 15, President Duterte should call for a special session to consider options for the reduction or suspension of the fuel excise taxes under the TRAIN Law. The most fiscally sensible option is, at the very least, to reduce the oil excise tax at a level that is equivalent to what we will gain in VAT to prevent the government from going further into already elevated deficit levels,” Salceda said.
“Reducing fuel prices at a level equivalent to VAT gains would already result in a P2.06 reduction in gasoline prices, P2.34 in diesel prices, and P2.89 in kerosene prices,” Salceda explained.
“Second, the government should open all public transportation options to full capacity immediately. This will help lower transport costs for those forced to take private cars due to the lack of available alternatives after the Covid-19 restrictions. It will also lower our consumption of fuel,” Salceda added.
Third, Salceda recommended immediate issuance of an Executive Order mandating the Department of Energy, the Department of Trade and Industry, and the Philippine Competition Commission to strictly monitor energy companies to prevent uncompetitive practices and hoarding in the sector.
Salceda pushed the tapping of the P4.5-billion Contingency Fund, which can be used for subsidies in the 2022 budget, the President’s P3 billion Socio-Civic Fund, on top of the proposed P1-billion fuel voucher subsidy promised by the Development Budget Coordination Committee.
“Fifth, I propose that the NDRRMC [National Disaster Risk Reduction and Management Council] conditionally allow the declaration of a state of calamity for economic reasons by local governments that are especially dependent on fuel [such as fishing communities] when oil prices become unmanageable.”
Palace meeting
Nograles made the announcement on Wednesday morning following the President’s Tuesday night meeting with several Cabinet members, top officials of the Armed Forces of the Philippines (AFP), the Philippine National Police (PNP), and other-high ranking officials to discuss possible scenarios should the raging Russia-Ukraine conflict continue and escalate.
Nograles said Duterte approved the economic team’s recommendations to strengthen the domestic economy, stabilize food prices, provide social protection, and explore diplomatic channels to help resolve the conflict.
Among these: the Department of Energy (DOE) recommendations to implement the P2.5-billion Pantawid Pasada, and P500-million fuel discount program for farmers and fisherfolks, with DOE monitoring supply and quality and ensuring there is no short selling.
“For the medium-term, we call on Congress to review the Oil Deregulation Law, particularly provisions on unbundling the price, and the inclusion of the minimum inventory requirements in the law, as well as giving the government intervention powers/authority to intervene when there is a spike and/or prolonged increase of prices of oil products,” he added.
The DOE earlier sought power to suspend excise on fuel through amending the Oil Deregulation Law. But amid calls for suspension of fuel excise tax in October last year, the Department of Finance said this move will result in foregone revenues.
Nograles said other government’s medium-term measures to address oil supply include building of the strategic petroleum reserve infrastructure, ensuring Minimum Inventory Requirements (MIR) and advocating for energy conservation and efficiency.
To abate spikes in basic commodity prices, he stressed the government stands ready to implement the Price Control Law if the need arises.
Food stability
ON food stability, Duterte approved the Department of Agriculture’s (DA) recommendations to boost local production with: the Plant, Plant, Plant Part 2 program, increasing of the rice buffer stock to not less than 30 days, financial assistance to rice farmers, fertilizer subsidy and giving market access through bilateral discussions in fertilizer-producing countries.
The DA recommended boosting the production of feeds and to give logistical support like food mobilization to provinces with high production through its Kadiwa ni Ani at Kita program, and to provide subsidies for the transportation cost of basic commodities.
Nograles said Duterte approved the Department of Trade and Industry’s recommendations to accelerate renewable energy adoption, support investments in Utility Scale Battery Storage to maximize utilization of renewable energy sources, support investments in modern storage facilities for oil and grains to increase within-the-border holding capacity and empower the private sector to help in strategic stockpiling.
Meanwhile, Malacañang said the AFP and PNP gave assurances that State troops, military and police assets are ready and have respective contingencies for any developments.
Certify the bill
HOUSE Deputy Minority Leader and Bayan Muna Rep. Carlos Isagani Zarate on Wednesday called on Malacañang “to walk the talk” by certifying as urgent a bill that will repeal or at the minimum review and amend the Oil Deregulation Law.
Zarate said Duterte should call for a special session to pass the proposal, claiming the President’s economic managers are “blocking” oil regulation moves.
“If Malacañang is serious about reviewing the oil deregulation law and lowering the price of oil, it will call for an immediate special session of Congress to discuss and approve the suspension of the excise tax on oil and also discuss HB 10386 or unbundling of oil prices and HB 4711 to regain control of the oil industry,” said Zarate.
In October 2021, Energy Secretary Alfonso G. Cusi, in a letter, asked Congress to amend the Oil Deregulation Law “to provide a framework for the government to intervene and address sudden, prolonged oil price hikes and require the unbundling the cost of retail products to determine their true and the passed-on cost.”
Image credits: AP/Aaron Favila