Deregulation

Fifteen years have passed since the enactment of Republic Act 8479, otherwise known as “Downstream Oil Industry Deregulation Act of 1998”, but down to this day, Oil Deregulation Law remains to be a subject of disputes. The heightening tension is not only based on whether or not we should regulate or deregulate oil industry but is also founded on an important economic question: Should the government intervene in setting oil prices or should they leave the market outcome to market players – producers and consumers? Before deciding on which side of the ring we will support, it is necessary to consider the following questions: What does it mean to regulate and deregulate oil industry? Who benefits or who suffers under a regulated and deregulated environment? Will regulation or deregulation be a blessing or a curse? Pondering over the answers to these questions will aid us in choosing whether we are for or against Oil Deregulation Law.

According to Bernales(2010), “deregulation is the lifting of certain government controls (such as price control) on several aspects of a specific industry, specifically the oil industry”. Oil deregulation, therefore, means that there is nothing that the government can do to interfere with pricing and operation of oil companies except policy making. On the other hand, under a regulated environment, government establishes Oil Price Stabilization Fund(OPSF) which pays for the difference in price set by government and price of oil in the global market.

Those who oppose R.A. 8479 claim that deregulation will result to abuses from oil companies whilst advocates of Oil Deregulation Law argue that it must be retained primarily because it encourages competition and protects government from vulnerability of price changes. The data gathered by Ibon Foundation, an independent think-tank, shows that pioneering oil companies, Shell, Caltex, and Petron has earned enormous profits in 2007 alone amounting to Php4.12 billion, Php 2.75