11 November 2009
- The Freedom from Debt Coalition (FDC) today urged Malacañang not to lift Executive Order 839 which freezes oil prices to October 15 levels, stressing that doing so is bad for a “disaster-battered economy in a period of global recession.”
The watchdog also urged government to immediately repeal Republic Act 8479 or the Downstream Oil Deregulation Act of 1998 because it limits government hand in regulation, and sends wrong expectations to oil firms, especially the ‘Big 3’ – Shell, Caltex and Petron.
Oil companies, especially the Big 3, have been pressuring the administration to lift EO 839, saying that supply have been running short after two storms devastated parts of Luzon.
FDC vice president Etta Rosales urged the government not to give in to the pressure from oil companies.
“This will push the economy further to the pits. Oil firms, with their preoccupation to short-term profits, simply lack even the medium-term outlook to perceive the repercussion to the national economy of their irresponsible call to lift EO 839,” Rosales said.
She said that it is necessary for the government to maintain price control for a product which price increases can lead to “cascading effects throughout the industry and economy.”
“High fuel costs will likely depress corporate income, and with it, household income. That would mean reduced revenues for government during an inopportune time of huge fiscal deficits,” Rosales said.Bad for economy
Rosales explained that letting oil price to increase together with the global market at this point would result to depressed Personal Consumption Expenditure (PCE).
PCE, FDC explains, is the main driver of economic growth, pegged at around 70.36 percent of the Gross Domestic Product (GDP) as of end-2008.
Rosales warned that depressed consumption will result to further decline of economic growth, “especially since it is PCE, growing at 15 percent from 2007 to 2008, that saved the economy from the decline of net exports last year.”
“While citizens’ demand for oil is not necessarily elastic, they may end up cutting back on other expenditures, and this is not good for the macro-economy already struggling to stem losses from a lackluster export market,” Rosales said.
Rosales added that the country’s transportation industry will likely pass its added costs to consumers, which may result to higher fare for commuters and higher supply-chain costs for companies.
“A policy of ‘stimulating the economy’ which the government is currently adopting would be incoherent from a policy of letting the unmitigated rise in oil prices,” Rosales said.Wrong expectations, limited regulation
RA 8479 sends wrong expectations to oil firms, FDC said.
“It makes them think that since the law is about deregulation, the government can’t regulate them in any way, whereas in fact, the government can actually takeover their operations, following Section 14(e) of the RA 8479,” Rosales said.
FDC said that RA 8479 is “hampering government’s ability to complete its political resolve” to lower down oil prices and “protect Filipino consumers.”
“While provisions in the RA 8479, like the Section 14(e), can be maximized in order to urgently regulate the oil industry, the more proactive move would be to repeal the RA 8479 and replace it with an alternative law that regulates and manages not just the downstream, but also the upstream, mid-stream, and demand sectors of the oil industry towards a low-emissions future” Rosales said.-30-