Introduction and Purpose
(1) The series of oil price hikes has led to public clamor for the review of the Oil Deregulation Law. Upon the directive of President Gloria Macapagal Arroyo, the Department of Energy created an Independent Review Committee (IRC) consisting of professionals from the private sector who are respected in their fields, to review and assess whether the Oil Deregulation Law has been effective and whether it has attained its goals under the prevailing economic circumstances and conditions in the country.
(2) There is no question that oil prices have increased rapidly. Gasoline and diesel are now priced in the neighborhood of P29.13/liter and P26.02/liter while they were P11.76/liter and P8.25/liter when the deregulation law went into effect.
(3) The purpose of this study is to determine if the main cause of these major price increases was the deregulation of the downstream oil industry; if there are measures or alternatives available to bring about lower prices; and, if it would be better for the country to revert to regulation. This study would like to answer the following specific perceptions and questions:
- What is the main cause of the present high level cost of gasoline and other oil products? Is it the Oil Deregulation Law?
- Would the prices be any cheaper if we were under a regulated regime?
- Did the Oil Deregulation Law actually encourage competition? Did competition bring about lower prices?
- Could prices be reduced by asking companies to reduce their profits? Or by providing subsidy or a program like the Oil Price Stabilization Fund (OPSF)?
- Why were increases in oil prices very frequent? Why didn’t prices decrease right away when there was a decrease in international crude prices?
- Are there disorders in the deregulated regime that need to be addressed?
- Why do oil companies seem to raise prices at the same time? Do cartels exist?
(4) Before conclusions and recommendations can be properly made, the IRC needs to:
- Learn about the oil industry by gathering data about the downstream oil industry from various sources (Chapter II).
- Listen to what oil industry players and consumers have to say through consultations and interviews (Chapter III).
- Present the IRC’s analysis and conclusions based on the two previous chapters (Chapter IV).
- On the basis of their analysis, prepare their recommendations (Chapter V).