Philippine Oil Deregulation – A Policy Research Analysis


The Policy As An Output

Embodied in the Republic Act No. 8479, otherwise known as the “Downstream Oil Industry Deregulation Act of 1998,” is the policy of the state that deregulates the oil industry to “foster a truly competitive market which can better achieve the social policy objectives of fair prices and adequate, continuous supply of environmentally-clean and high quality petroleum products” (Congress 1998).

With deregulation, government allows market competition. That means government does not interfere with the pricing, exportation, and importation of oil products, even the establishment of retail outlets, storage depots, ocean-receiving facilities, and refineries.

It has been a decade ago since lawmakers made a proposition that deregulation would secure the Philippines from the vulnerability of oil price shocks due to its heavily dependent on imported oil. But it is now increasingly apparent that many are calling to scrap the law as six out of ten Filipinos favor the repeal of RA 8479 (Somosierra 2008).

The Policy As A Process

When President Fidel Ramos started his administration in 1992, the country had already started feeling the effects of power supply deficiencies, with major areas already experiencing power interruptions. The power crisis caused a slowdown in the national economy for nearly three years and prodded the government to initiate major reforms in order to rehabilitate the energy sector (Viray 1998, p.461-90). In response to a power supply crisis, Ramos revived the plans to liberalize the oil industry that were cut short during the Aquino administration due to Gulf crisis.

The government’s efforts to enact an oil deregulation law were also intensified in 1995 when the Oil Price Stabilization Fund (OPSF ) started to threaten the fiscal stability of the economy. Deregulation was thus seen as the solution to the recurring deficit.

The problem of the OPSF deficit was in part related to the highly political nature of oil prices, which encouraged government to defer price increases as much as possible in order to avoid public protest even at the expense of incurring a fiscal deficit. However, government mismanagement of the fund also included using it for non-oil purposes such as financing other government projects or the public sector deficit when it was in surplus (Pilapil 1996, p.12).

At the height of a strong lobbying effort for deregulation by oil companies and despite the loud opposition of militant groups, the industry was eventually deregulated in 1996 with the enactment of RA 8180 (the Downstream Oil Industry Deregulation Act of 1996) in Congress.

However, Supreme Court declared in 1997 the unconstitutionality of RA 8180. The Court decision stemmed from three provisions in the law that were deemed to inhibit free competition and therefore, violated the anti-trust mandate of the 1987 Constitution (Supreme Court 1997). But administration Congressmen quickly re-filed the oil deregulation bill leading to the new oil deregulation law. RA 8479 was then enacted to pave the way for the full deregulation of the oil industry. Since then, government has no longer control over the industry. What it …