Wringing their hands

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Brace for a fuel shortage in Luzon and thereafter, an economic crisis

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A failure to communicate

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Screwing the entrepreneur

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Remedies for cartelization

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Pandacan revisited

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Now that oil companies have adjusted prices by Php1.50 per liter for gasoline, diesel, and kerosene, instead of the usual weekly Php0.50 adjustments, officials have begun wringing their hands over what to do with skyrocketing oil prices.

There have been calls to reregulate, even nationalize, the oil industry. Some legislators have called for removing the Value Added Tax (VAT) on oil.  While some have called for repealing the oil deregulation law, saying it is the cause of high prices.

Prof. Benjamin Diokno of the UP School of Economics, however, says in a recent article in the Inquirer’s front page that these proposals are counterproductive.

While motorists would want to avoid paying for skyrocketing oil prices, they have no other choice but to accept the harsh reality and scrimp more just to pay for gas.  Motorists have begun cutting their trips – if the weekend traffic is any gauge. The problem with this country is there is no sane alternative to private transport. Many car owners would willingly give up their vehicles if they could turn to mass transit systems that government has failed to provide. In the U.S., for instance, car owners turned off by skyrocketing oil prices have turned to mass transit to go to work, the New York Times and the Associated Press report.

It looks like high oil prices are here to stay.  Some suggestions:

For the short term:

§ Encourage people to walk short distances.  The government, through local government units, should expand sidewalks and get rid of sidewalk vendors.

§ Levy higher taxes on gas-guzzling vehicles or those with an engine displacement over 2000 horsepower.

For the long term:

§ Government should allocate part of its earnings from VAT to invest in mass-transit systems.  Given an efficient mass transport system with suitable sidewalks will encourage car owners to take mass transport and leave their vehicles at home.

§ Deregulate the transport industry.  Operators do not plow back their earnings into their vehicles, which is why these dilapidated jeepneys and buses continue plying the roads, and which is why the vast majority of PUVs do not even provide a battery to power their headlights at night.

§ Encourage telecommuting by providing incentives for companies who allow their workers to telecommute at least once a week.  This scheme will allow the workers to save fuel and allow them to stay at home.

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DOE Secretary Angelo Reyes recently berated oil companies for predicting how much their so-called “under recoveries” are, saying that since the market is deregulated, the market should be the one dictating the price.

In the same breath, Reyes (with the TV cameras rolling, at that) berated the LPG Marketers Association (LPGMA) for allegedly colluding with each other in setting the prices of LPG.

Reyes should follow up his words with concrete action by convening the DOE-DOJ Task Force as found in RA 8479, and investigating the LPGMA for this alleged cartelization.  Otherwise, he will be like his other colleagues in government – wringing their hands and running around like headless chickens.

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Have you ever noticed that some ATMs are more prominent in certain malls but others are located in the wayside?  Or why a drugstore chain is conveniently located in another mall chain while another more established drugstore chain is absent in these malls?

Examples of anticompetitive behavior include price fixing, predatory pricing (pricing below cost to kill competition), tie-in arrangements, and others.

The U.S. and the European Union have elaborate anti-trust laws and very powerful regulators that make big businesses quake in their boots whenever the competition authorities come knocking at their doors.

Recently, the British competition agency fined British Airways for fixing the airfares while the U.S. Fair Trade Commission ordered Microsoft to offer Internet Explorer separately from its operating systems.  The U.S. authorities found that bundling Internet Explorer with Windows led to the death of the erstwhile browser pioneer Netscape.

Back home, pending before the trade committees of both chambers are bills seeking to prohibit certain anti-competitive acts such as cartelization and price fixing. While such acts are currently prohibited under the Revised Penal Code, anti-trust behavior in the country has been honored more in breach than in obedience.

The preeminent energy laws in the country, the Downstream Oil Deregulation Law (RA 8479) and the Electric Power Industry Restructuring Act (RA 9136) both have anti-trust provisions.  Compared to other industries such as banking, insurance, and telecommunications, these two laws spell out what the prohibited anti-trust behavior is.

The Oil Deregulation Law, however, has more elaborate anti-trust provisions than does EPIRA, and spells out the process by which an aggrieved party can sue for damages for violations of the law’s anti-trust provisions.

Curiously, no one has bothered to avail themselves of these provisions, even the self-appointed consumer watchdog.

Still even more curious was the fact that persons who actively participated in the deliberations in the Tenth Congress on oil deregulation now say that an anti-trust law is needed to quell the continued price increases by the oil companies.

Most curious of all is that oil companies, who will be most affected by the passage of the anti-trust bills pending in both chambers, were not represented in the hearings of these bills.  If they do not watch out, they make wake up one fine day and realize that these bills have become law without their even knowing it, like a certain law that charges a Php0.10-per-liter levy for the transport of oil products via Philippine waters.  But that will be the subject of another column.

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