MANILA, Philippines – With oil prices on the rise anew, calls for the scrapping the oil deregulation law are again being made. However, an energy expert points out that this is not the way to solve the problem of fuel pricing.
 
Prices will still soar, whether the oil sector is regulated or not, according to former energy secretary Francisco Viray, the main guest at a live web forum hosted by abs-cbnNEWS.com on Tuesday night, December 16, 2009.
 
Viray explained that this is because the Philippines is highly-dependent on imported oil, making it susceptible to inflation and world market prices shifts.
 
The Oil Deregulation Act of 1998, or Republic Act 8479, was passed during Viray’s stint in the Department of Energy under the Fidel Ramos administration.

 
Before the law was enacted, oil prices were regulated and fluctuations in the price of oil in the world market were subsidized by government through the Oil Price Stabilization Fund (OPSF).
 
Viray, however, pointed out that certain problems in subsidizing. The government does not have enough money to begin with. Finances, he added, has always been the problem of a regulated industry.
 
This is precisely what happened with the OPSF. In theory, the fund was supposed to accumulate reserves whenever oil prices are low while refunding oil companies for their losses when global prices are high.
 
Fund mismanagement and successive increases in global oil prices led to a huge deficit in the OPSF that the national government ended up subsidizing. This prompted proposals to deregulate the industry.
 
'Politicized industry'
 
Forum panelist Myrna Velasco, a journalist who covers the energy sector, noted that Filipinos should not be addicted to subsidies, as what happened in rice. "If the Filipino consumers' addiction to subsidies will continue as a trend, they will never get used to paying the right price for commodities necessary for their daily subsistence—be it oil or electricity," she wrote.
 
Economist Peter Lee U of the University of Asia and the Pacific, who also logged on to the live forum, noted that economists only prescribe oil regulation when there is monopoly in the market.
 
"It is clear that in the case of oil, there can be new competitors or sellers of oil like the new players. What is critical is that there be sufficient competition policy laws to ensure free competition," Lee wrote.
 
On the other hand, online forum panelist Sally Monteiro of the Philippine Petroleum Institute pointed out that the real problem lies not in the laws but in the politics of the downstream oil industry.
 
The Philippines has enough laws to deal with oil issues, she said. "What the next President should do is to make deregulation work and be understood."
 
"Sadly over the years, the oil industry has been highly politicized, and it is now being blamed to be the cause of high oil prices," she wrote. According to her, the consultations conducted during the passage of the bill, espoused the government’s commitment to deregulation.
 
Oversight function
 
Monitoring oil prices is hard in both a regulated and deregulated industry, Viray said. Energy is, after all, a business venture. Under a regulated industry, companies are forced to lower the prices of their commodities. By doing so, profits return in a longer period of time.
 
"If you ask companies to lower prices, it will be harder to monitor when they'll get return of investments," Viray said.
 
Similarly, if there are price increases, consumers will suffer.
 
The key, Viray said, is for the government to strike a balance by being proper and reasonable. "At the end of the day, it's how you do your oversight function," he said.
 
With the current spike in the prices of oil, Viray shared that what the government should do is monitor if prime oil companies are making the proper adjustments. “The government has information on prices and all oil-related data,” he noted.
 
Unique online event
 
A unique Web-exclusive event hosted on www.abs-cbnNEWS.com/energy, the energy forum tackled the current state of the country's energy sector. Viray was invited as guest on the webcast while panelists consisted of public officials from various offices relating to the energy sector, non-government organization representatives, and members of the academe were asked to log on to a chat facility to participate in the live discussion.
 
At one point, some of the presidential candidates, including Sen. Noynoy Aquino, JC Delos Reyes and Nick Perlas, were shown sharing their plans for the energy sector. Other candidates designated representatives who represented them in the live discussion.