Strong Peso Meaningless Amid High Oil Prices — Ibon

The Arroyo government has already lost its credibility in terms of effectively addressing the issue of high oil prices. It is now running out of excuses to justify the indefensible Oil Deregulation Law. Since it was first implemented in April 1996, local pump prices have jumped by around 535 percent. With unregulated oil price adjustments under Oil Deregulation Law, the big oil companies were able to overprice oil products by P4.55 per liter at the gasoline stations. This amount does not yet reflect what giant transnational corporations (TNCs) in the global oil industry rake in transfer pricing through their local units and partners like Shell, Petron, Chevron, and Total. IBON estimates that at current levels of Dubai crude spot price, the oil giants earn superprofits of around US$50 per barrel in crude oil alone by capriciously padding its true costs.

Malacañang could no longer insist on its palliative measures such as the oil tariff adjustment mechanism wherein taxes on imported oil are lowered based on certain trigger prices in the global oil market. At best, it could only delay price hikes and at current price levels, it does not make a dent on the impact of oil prices on people’s livelihood and the economy. Nor can Malacañang convince people to patiently wait for its medium and long-term programs on alternative fuels to bear fruit. In the first place, these programs are still under the control of the oil cartel and other foreign corporations thus offsetting whatever benefits the country may gain in the future. More importantly, the issue is that oil prices are very high at present.

The already weak economy could only but worsen amid the high oil prices. In the coming months, we should expect more and more companies reporting plant shutdowns and retrenchment, aggravating job scarcity in the country, which has already been at its worst levels in history, and resulting in overall economic slowdown. With less businesses and wage earners to tax, government would have less domestic sources for its revenues. It will then have to increasingly rely on the regressive value added tax (VAT) on petroleum products that further drives up oil prices. The country is entangled in this vicious cycle with ordinary income earners shouldering all the costs.

IBON has persistently argued for state regulation of the downstream oil industry as the immediately doable reform that can be implemented to address the issue of high oil prices. Congress has to intervene and repeal the Oil Deregulation Law. More than 10 years of the deregulation experiment are enough to show that there is no way that it will work. But even reliable and progressive legislators recognize that any initiative in Congress to repeal the Oil Deregulation Law could only gather steam with strong public pressure.

In the long-term, nationalization of the energy industry which includes oil and other fossil fuels as well as renewable energy including biofuels must be seriously pursued. Energy security that serves national industrialization is only possible with the government as the central player. (IBON Features)