THE recent surge in global oil prices has triggered a serious energy crisis around the world. In response, the Philippines has declared a state of national energy emergency — the only country that took this step.
This situation brings to mind an earlier oil crisis. In 1973, members of the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, cut back oil production because of the war between Egypt and Syria on one hand, and Israel on the other. Oil prices rose sharply. At that time, then-president Ferdinand Marcos Sr. used government funds to buy Esso, a local subsidiary of Standard Oil, now known as ExxonMobil. This led to the creation of the Philippine National Oil Corp. (PNOC). With the PNOC in place, the government was able to stabilize domestic oil prices. This action by Marcos helped protect the entire country from the worst effects of the global shortage.
Many years later, during the term of former president Fidel Ramos, Congress passed Republic Act 8479, or the Downstream Oil Industry Deregulation Act of 1998. The law was intended to open up the oil industry to more players, with the main idea that greater competition will result in stable and reasonable oil prices for the public.
Today, a small number of large oil companies dominate the domestic market. These companies adjust their prices almost at the same time whenever there is an increase in the world market. Because the Philippines imports nearly all of its oil, these price adjustments are passed directly to Filipino consumers. The government has very limited power to intervene or to cushion the impact on the people.
The effects are now clearly visible. Fuel prices have risen sharply in recent weeks. Transportation costs have increased; so naturally have the prices of other basic goods. Many families and small businesses are struggling to cope. Public transport operators have staged protests, and inflation is once again becoming a serious concern.
In this situation, the national interest requires a careful review of the current systems that leave the government without effective tools to protect consumers when oil prices spike. The declaration of a national energy emergency is only a temporary measure. It does not provide a thought-out systemic set of solutions.
There is also almost no planning — of inventory, taxation or relationships. Why did the Philippines not import Russian oil earlier at discounts when available and used by Japan, India and many other US allies, while under US sanctions? Also, the higher prices now massively increase the government’s value-added tax (VAT) collections without portions going to helping ordinary citizens regarding oil.
We need to put in place rules and protocols that balance the interests of distributors, investors, processors, and the government, with the need to protect the public during emergencies. A regulated system could include mechanisms for price monitoring, subsidies, stabilization moves and funds, VAT and other tax readjustments, temporary price guidelines that still consider economies in times of crisis. Stronger, more competent government officials and legislators, consultants, and teams need to work together to study diplomatic, technical, logistic, commodity behavior and trade possibilities, as well as oversight of supply and pricing decisions.
The current oil crisis has made one thing clear: when global conditions become difficult, the Filipino people should not be left to bear the full burden of price increases decided solely by private companies. The government has a duty to ensure reasonable access to fuel, which is essential for transportation, food production, and daily life.
Congress now has the opportunity to act also to adjust taxes, fees and apply assistances, including possibly revising parts of the Oil Deregulation Law and replacing our current energy management with a more balanced regulatory system that would serve the long-term interest of the nation.
Rafael P. Tuvera is a lawyer who taught law and political science. He analyzes geopolitics, diplomatic strategy with emphasis on productive approaches with legal and historical context. He is also a contributor to IDSI and other publications.
