Sponsorship speech of Rep. Casiño for House Bills 1724, 3029, 3030

Delivered during the hearing of the House Committee on Energy
August 20, 2008

The four House bills being proposed by representatives from the party lists Bayan Muna, Gabriela and Anakpawis – HB 1724 repealing the Oil Deregulation Act of 1998, HB 3029 regulating the industry, HB 3030 establishing a centralized oil procurement mechanism, and HB 3031 re-establishing state ownership of Petron, which is in another committee – are attempts to legislate medium-term solutions to the problems plaguing the oil industry.

Exactly what are these problems? From a layman’s perspective, these are the following:

1. Frequent and steep oil price hikes;
2. Transfer pricing and other unfair practices of the foreign-dominated oil cartel;
3. The inability of the State to protect the people from the oil oligopolies;

These were the very same problems supposed to be addressed by the Oil Deregulation Act some 10 years ago. But these problems persist and have even worsened.

Since the first deregulation law in 1996, there have been at least 81 rounds of oil price hikes. Prices have risen by some 400%. Since Mrs. Arroyo came to power, prices have increased by 275%. In 2006, prices increased 36 times. This year, prices have increased by at least 18 times.

Deregulation was supposed to break the stranglehold of the oil cartel, the so-called Big 3 of Shell, Petron and Caltex. To date, they are still the dominant players, controlling 85-90% of the market and practically all oil refineries. The cartel’s profits, both here and abroad, are at an all-time high. Their monopoly operations have become more sophisticated. As an effect, the smuggling of oil has become a rampant practice.

In the face of all these, the state has failed to protect the people. Deregulation has tied the hands of the government and reduced it to being a mere spectator – shouting and pleading with the oil companies every time oil prices go up but not being able to actually do anything about the situation. In most cases, the Department of Energy and the President herself become the spokespersons and apologists of the oil companies.

What do we propose?

Basically, we want to develop a strong national oil industry that is:
• Owned and controlled by Filipinos
• Regulated, transparent and accountable, with the State itself as a major player; and
• Sustainable, aimed towards self-sufficiency and geared for national development

Towards this aim, we are proposing the following measures:

HB 1724 repeals RA 8479 or the Downstream Oil Deregulation Act of 1998.

HB 3029 creates a 6-person Petroleum Regulatory Council – a quasi-judicial regulatory body that will:

• monitor, regulate and hold hearings on oil and petroleum prices
• maintain a comprehensive database on the industry
• manage a buffer fund, called the Oil Price Buffer Fund (OPBF)

Unlike the previous Oil Price Stabilization Fund (OPSF), the proposed buffer fund is for the strict and unique purpose of cushioning the impact of frequent and drastic price fluctuations. It prohibits all other reimbursements and specifically prohibits the President from tapping the fund. After five years, funds may be invested in secure instruments.

HB 3030 - Creates the National Petroleum Exchange Corp. as a subsidiary of the Philippine National Oil Company (PNOC). Within 4-5 years, the Exchange Corp. is envisioned to be in-charge of importation, storage, sale and distribution of all oil and petroleum products in the country.

The state-owned PNOC-NPEC shall formulate a Centralized Petroleum Procurement Plan, which will determine the country’s total oil requirements including the formation of a buffer supply, and negotiates accordingly with suppliers, whether private or state-owned, for the best prices and terms.

Integral to the operation of both bills is the government buy-back of Petron, as envisioned in HB 3031. This is to be done in stages, with government initially controling 51% of the company and then 100% within four years. Petron is to be reoriented as a state-owned company with social and developmental functions and responsibilities. Four billion pesos is initially allotted for the buy-back, with the rest to come from future the earnings.

There are other features of the bill which I leave to the committee’s discretion to deliberate on.

Thank you, Mr. Chairman.