Is downstream oil deregulation working?

Following a sudden P3 per liter increase, the highest in the recent wave of rate spikes that has brought diesel prices almost at par with gasoline, it does not make sense. According to Press Secretary Jesus Dureza, the oil firms agreed to reduce diesel prices to give the public relief.

It does not make sense. Why torture us with a P3 per liter rate hike in the first place only to immediately slash it in half just to give us a small measure of respite? Not unless the guys running the local oil companies have a bad sense of humor.

It does not make sense either that the move was a response to the administration's appeal too the private oil companies to lower diesel prices, as claimed by Dureza. The whole point of the Oil Industry Deregulation Law is to make the industry more attuned to market forces. Certainly, political and public sensitivities play no part in that. If they did, why not appeal to bring down to pre-crisis levels?

Even Petron Corp., the dominant industry player, said as much when its spokesperson, Virginia Ruivivar, admitted that while they gave in to the request of the Palace, the firm will have to recover this eventually. More likely sooner than later.

I will give credit to Dureza though when he said that the move has nothing to do with the -38 net satisfaction rating of Mrs. Gloria Macapagal-Arroyo, according to the latest survey conducted by the Social Weather Station. Not because as Dureza claims that Mrs. Arroyo "irrespective of whether she is popular or unpopular, will do what is right to the nation.knowing the President this is a continuing day to day focus by her on how to be able to really help mitigate the adverse effects of the global phenomenon like this (oil price increases)." But, quite simply, because there is no chief executive or government, for that matter, that is bigger and more powerful than free market forces.

That is the problem with trying to hitch one's wagon to the supposed train of economic success we have experienced. Having claimed credit for everything when the times were supposedly good, now that the economy is sinking it is the time for retribution. And, no amount of trying to appear firm, resolute and statesman-like will ever cure the public relations disaster that is underway.

If at all, Malacañang should take the opportunity to review the successes and failures of the Downstream Oil Industry Deregulation Law since the measure was touted as one that would bring pump prices down. Malacañang should not find this difficult since Mrs. Arroyo herself played a key role in crafting this piece of legislation as a senator.

To be sure, what the law covers is the downstream side of the industry. If the cost of having the oil gush out of the well is US$150 per barrel, there is not much that the law can do about that. But still, now is the time to ask if the law actually spurred the entry of new investments or players to contest the dominance of the three major players that lord it over the local market.

Equally important, this is also an opportunity for the government to reassess its own addiction for oil price hikes since these also increases its own direct tax take on oil products through the Value-Added Tax (VAT). For certain, the government will not admit it has any such addiction. No addict will ever admit to having that kind of a problem. But now would be a good time for the government to voluntarily go into VAT-rehab, so to speak. At least for petroleum products.