Unioil

With the way the economy is now, perhaps the government should take stock of what needs to be prioritized, particularly in terms of granting some form or relief to the poor and the middle class. And, to some extent, perhaps it can reconsider leaving things to chance primarily by letting so-called market forces determine or even dictate the prices of commodities.

Free-market forces do not always operate to the advantage of consumers, particularly the poor. In many instances, it tends to favor businesses over customers, especially if a strong and reliable infrastructure for fair competition is still to be established. Ultimately, in the matter of fair trade over free trade, I will take the former anytime, even on Sundays.

To date, attention is on the much-publicized “fight” for cheaper medicines. Obviously, the campaign needs support, at least in invoking some form of consumer protection and price fairness in the case of essential medicine. Regardless of the varying opinions of public officials and the pharmaceutical industry, I believe the government is on the right path in soliciting voluntary compliance.

Invariably, such solicitation comes with a not-so-veiled threat of imposing price caps in case the pharmaceutical industry refuses to accommodate the public call for cheaper medicines. This strategy, in my opinion, is a win-win relative to ensuring industry compliance with existing legislation on medicine pricing—regardless of the opinion that perhaps the cheaper- medicines law itself is flawed. That is a matter for Congress to remedy.

But maybe the government should take things further by focusing on other items that are just as essential as medicine, such as fuel. At times, one cannot help but wonder how things would have been had the oil industry not been deregulated, and the government had continued to regulate and subsidize the price of fuel and cooking gas through the defunct Oil Price Stabilization Fund or OPSF.

Industry deregulation prompted additional investments and the entry of more market players—although significantly smaller than the Big Three consisting or Petron, Shell and Caltex. And while the broadening of the industry should have resulted in consumer advantage through price competition, this did not necessarily occur. Worse, over time, the country saw fuel and cooking-gas prices rising to unprecedented levels—with the government seemingly useless in giving relief to the public.

And to date, it remains questionable whether there is actually fair competition ongoing, with government officials themselves debating if the industry is overpricing its products. One can only wonder whether Malacañang and Congress will have enough political will to institute a strategy similar to that employed in the case of essential medicines.

Just on Monday, Party-list Rep. Vigor Mendoza II filed a resolution urging the House Committee on Energy to conduct an inquiry to define “fair pricing” for petroleum products. This is in light of the volatile pricing of oil abroad, leading to spikes in local pump prices. He noted that in determining what was fair and reasonable in terms of fuel pricing, there was much confusion over the proper formula to use.

Incidentally, the allegation of overpricing has been submitted for court determination. Moreover, the Department of Justice (DOJ) has also asked oil companies to submit documents to prove that recent domestic fuel movements have been adjusted in accordance with the Oil Deregulation Act of 1998. Justice Undersecretary Jose Victor Salazar noted the need to determine probable case of a criminal act, possibly profiteering.

The DOJ was prompted by Unioil’s recent announcement of a massive price cut, which other oil companies scored for allegedly being misleading. Deliberately or otherwise, the Unioil action also put everybody else in the industry in a bad light. Competitors point out that to begin with, Unioil was selling at higher than market, and therefore its massive price cut simply put it at par with other fuel retailers.

The Unioil action prompted even Energy Secretary Angelo Reyes to strongly react, even taking the line of Unioil competitors that its price cut was misleading to the public because it was supposedly based on Unioil’s high suggested retail price, and on the average market price. The thing is, there doesn’t seem to be anything illegal in what Unioil did.

Reyes noted, “All we want is transparency because in the end, you cannot hide the truth.” And this brings me to my point. How can the government espouse transparency when there is no clarity on how oil prices are actually computed, and whether prices are fair to consumers, as noted by Representative Mendoza? Moreover, if everybody believed the industry to be actually transparent, will there be a pending suit in court and an investigation by the DOJ on oil prices? Will there be moves to compel oil companies to open their books to the public? Will Secretary Reyes and National Economic and Development Authority Director General Ralph Recto be involved in a public debate regarding alleged overpricing?

It is utterly naive for Reyes to think that he can “keep everybody honest and on his toes by [simply] monitoring their prices.” Unfortunately, even the Palace is not in a position to threaten the industry with price controls—just like it did the pharmaceutical industry—simply because the Oil Deregulation Act does not provide for such. In reviewing the oil law, perhaps this is one aspect that Congress should consider.