Mr. Speaker, Members of this August Body, Ladies & Gentlemen:


Every Filipino has a stake in the oil industry.   It is a remarkably important industry because energy is the very fuel that powers our country’s engine of growth.  It affects most aspects of the daily activities of Juan dela Cruz and, to a large extent, the very performance of our economy.


The regulation of the oil industry started during the early 70s when there was an energy crisis—when oil demand outstripped oil supply leading to the skyrocketing of oil prices.


Since then, however, the whole world has gotten wise and supply sources have multiplied.  And while regulation was the answer at that time, it is not necessarily anymore under the present situation.


Such a system has led to a situation that is too political, sometimes holding the government hostage to a situation it created.   Oil has become such a political commodity.  We need to set the government free from such constraints.  In fact, while before it was deemed beneficial to the economy, regulation at present is a hindrance to our growth.


Mr. Speaker, what we have is a sorry state of affairs, because oil prices are dictated by political concerns.  The Oil Price Stabilization Fund (OPSF) balance is not allowed to accumulate and which inevitably leads to a deficit and endless delays in price adjustments.  A growing OPSF deficit requires an increase in the pump price as sold in the gas stations, and as the increase becomes higher it is the consumer that eventually shoulders the burden of this flawed policy.


The government’s recent decision not to increase oil prices in the face of public pressures has further depleted the OPSF.   At present, prices do not reflect market realities.  Given the continued depreciation of the peso against the dollar, complexed by our huge budget deficits, maintaining the OPSF out of the government’s coffers is economically prejudicial.


The lesson from this experience has been crystal clear—unless politics is removed from the oil price-fixing structure, the problem of the industry will be a recurring nightmare.  Deregulation, then, is the only definitive and long-term solution.


Mr. Speaker, as a general rule, decisions on pricing should be left to the markets and not to government bureaucrats.  The experience of foreign countries has shown that avowed goal of regulation such as “fair pricing” is more successfully served by a competitive market rather than by political bodies.  The economy can adjust much quicker and more efficiently to external and internal market forces.


This policy, however, requires greater transparency and automaticity in the setting of oil prices so as to remove any doubt of manipulation or collusion.  For instance, we can set the automatic adjustment of domestic oil prices based on Singapore Import Parity (SIP) properly adjusted for tariffs and landed costs.


The government should intervene only at extreme cases when markets collapse or work disastrously.  In such instances, the role of government should be limited to removing the barriers to effective market operation.


Some officials may oppose deregulation simply because they will lose influence or even their positions.  We cannot let these considerations derail us any further, Mr. Speaker.  The tight fiscal setbacks and the worsening problems of the oil industry make this policy necessary.


Moreover, severing politics in the oil industry will attract more players to engage in the business for government interference will be lessened.  The fear of being dictated on how they will operate their business will be minimized.  Corollary to all this will be the emergence of job opportunities for our countrymen.


Mr. Speaker, I would like to reiterate again the two compelling reasons why we should deregulate the oil industry.  First, oil price setting and investments are two delicate matters which must be determined by market forces and not by government bureaucrats.  Second, deregulation paves the way to a freer and more efficient oil industry as it allows the entry of more players.  This would mean additional choices and better product quality, all to the benefit of the consuming public.


We acknowledge the fact that the deregulation of the oil industry is a daring position that the government proposes to adopt after long years of regulation and control.  It is for this reason that House Bill No. 5264 presents a two-phase deregulation scheme—a transition phase and a full deregulation phase.


Mr. Speaker, the present economic environment is perfect for the first phase of the proposed deregulation plan.  As such, legislative action outlining the needed structural reform will be both timely and proper at this time.


Mr. Speaker, my esteemed colleagues, let us not waste any moment.  Let us push for the immediate approval of this bill in order to move our country forward toward its dreams of economic progress.


Thank you.

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