Oil deregulation

Beyond fuel taxes, regulate and nationalize the oil industry

Photo from Anakpawis

Exactly how much are jeepney drivers losing because of the unabated oil price hikes?

The pump price of diesel has already increased by ₱18.45 per liter (including the latest adjustments on Oct. 26) this year. That is equivalent to two passengers paying the minimum fare of ₱9. Considering that jeepneys are only allowed a maximum of 50% passenger capacity, the impact on a driver’s income is tremendous. A 20-passenger jeepney can carry only ten passengers. With the rise in diesel prices this year, jeepneys practically take a maximum of just eight passengers paying the minimum fare.

A month’s worth of rice

Let us look at the UP Diliman to SM North Edsa route, for instance. This entire route is about 13.25 kilometers roundtrip. Based on one study, a jeepney consumes around one liter of diesel per seven kilometers. So, the UP-SM roundtrip uses up about two liters of diesel. Meaning, a driver loses ₱36.90 per roundtrip due to the price hikes. That amount is almost equivalent to the lowest rice price per kilo (₱38) in NCR. 

A 20-passenger jeepney usually has a full tank capacity of 60 liters, which means that the driver is spending ₱1,107 more to fill up his tank. That is equivalent to about 29 kilos of rice – or two weeks’ worth of the regular consumption of a 5-6-member household. 

For the UP-SM driver, his full tank will last for around 30 roundtrips. Assuming he makes ten roundtrips per day, it means that he must refill every three days – or twice in one week. He thus spends ₱2,214 more on diesel due to the price hikes. That is equivalent to a month’s worth of his household’s rice consumption.

However, raising the minimum fare will only shift the burden of the oil price increases from the drivers to the commuters. Like the jeepney drivers, commuters are also working-class people whom the pandemic severely battered and barely make a living. 

What about the proposal to revive the Gloria Arroyo-era Pantawid Pasada program? For one, the cash aid like during Arroyo’s time will likely be too small to make a dent in runaway oil prices. The proposed subsidy cited in media reports, for instance, is between ₱1,700 to 2,000 per month. As mentioned, the UP-SM driver is already spending an additional ₱2,214 per week. But the amount of cash subsidy is a secondary issue. The primary point is that the Pantawid Pasada merely shifts the burden of the oil price hikes to the taxpayers, including the drivers themselves. 

Making oil firms, government accountable

Meanwhile, the oil companies that profit immensely from high prices and unreasonable price hikes are left off the hook. Policy interventions should primarily target them. One is through effective price regulation to stop their profiteering when they adjust prices every week.

Like the oil companies, we must hold the government accountable as well. The people should press the policymakers to abolish the regressive and exorbitant fuel taxes, such as the 12% value-added tax (VAT). This move can immediately bring down pump prices and provide much-needed relief for the jeepney drivers and the public.

At 12%, the Philippines charges the highest rate in Southeast Asia for VAT or VAT-like impositions. Cambodia, Indonesia, Laos, Malaysia, Thailand, and Vietnam charge 10%, while Singapore charges 7%. We also charge a higher rate than some of the most prosperous countries in the Asia Pacific like Australia, Japan, and South Korea that all charge 10%, and Taiwan, which charges just 5 percent.

While it is not the Philippine government that sets the price or the price adjustments in the global oil market, it should nonetheless drop its defeatist attitude and cries of imagined helplessness as Filipinos suffer from rising prices.  The government can directly and immediately reform its tax policy on petroleum products and reduce the cost not just for jeepney drivers and their households but for the entire economy.

Regulation and nationalization

Beyond abolishing oppressive fuel taxes, the government can and must repeal Republic Act (RA) 8479 or the Oil Deregulation Law to protect the public and the country from excessive prices and unreasonable price increases. In its place, policymakers must develop and implement a comprehensive program for regulating the downstream oil industry. 

This program, which Congress can legislate, should contain the following essential components: (1) Centralized procurement of imported crude oil and refined petroleum products; (2) Buffer fund, which can be financed through the operations of the centralized procurement to cushion the impacts of sudden surges in global prices; (3) Transparent determination of pump prices, including through full public disclosure of pricing scheme and inventory of the oil firms; (4) Democratic public consultations or hearings to justify oil price adjustments; and (5) State participation in refining and distribution of petroleum products.

Seldom discussed is that the issue of high oil prices and allegations of price manipulation is just a consequence of the fundamental problem of the Philippine oil industry, which is foreign monopoly control through their direct investments and strategic partnerships with the local compradors. The country must seriously pursue a long-term nationalization program that would end the domination of transnational companies and their local agents. The initial reforms cited earlier to regulate the downstream activities of the oil companies are a positive step towards nationalization. 

Nationalization requires the reorientation and restructuring of the oil industry to uphold the people’s welfare and advance the national interest. For example, with a nationalized oil industry, the people and economy would genuinely benefit from undertakings like the Malampaya instead of foreign capital and local cronies and oligarchs exploiting such projects for their narrow private interests.It is hard to nationalize the oil industry if the government would not shift from its current neoliberal development paradigm, which permits the unbridled operation of so-called market forces and relies too much on imported commodities and foreign capital. The nationalization of the oil industry can only be successful within a national industrialization program where internal sources of growth are promoted and protected. ###

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