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Promotion of Free Market Atmosphere           
        
Adequate safeguards are provided under the law to ensure that healthy competition would govern pricing, that fair competition is promoted and that cartels and monopolies in the industry are prevented. Among these is the creation of a DOE-DOJ Task Force to address unreasonable rise in prices.

RA 8479 promotes a free market atmosphere in the local oil industry similar to the pre-1973 condition. It has liberalized the downstream oil industry; established uniform tariff duties on both imported crude oil and refined petroleum products; promoted fair trade practices and free competition; encouraged entry of the new players in the industry; and promoted retail competition.

The deregulation of the oil industry had encouraged the entry of over 601 new players, bringing in a total of P28.4 billion worth of investments in various downstream oil projects. These players include both local and foreign investors engaged in varied activities such as retailing, bulk marketing and distribution of fuels and LPG, as well as operation of depots and storage facilities. In a span of eight years, the new players now have already posted a market share of 15.3% by the end of 2005.

It must be emphasized that deregulation does not guarantee lower prices but fair prices. Domestic oil prices are increasing because world market prices are increasing. Domestic prices are generally based on international prices with Dubai as benchmark crude for Asia and the mean of Platts (MOPS) in Singapore as basis for finished products. Hence, adjustments in domestic oil prices are simply reflective of crude costs and foreign exchange rates. For new players, who are generally, importers of finished products, the MOPS is a key indicator for oil prices.

It may be recalled that during the transition phase, prior to full deregulation, the Energy Regulatory Board (ERB) adopted an automatic pricing mechanism (APM) in determining domestic oil prices. Had the APM been applied today, prices in the domestic market would have been much higher.

As mandated, the DOE monitors prices of both the raw material crude oil and the refined petroleum products in the international market and provides daily summaries to both print and broadcast media, as well as to concerned government agencies. Domestic prices, both at the wholesale and retail levels, are also monitored. Moreover, the supply (importation/production), demand (sales/exports) and the inventory of the oil companies are being monitored with importers, refiners and marketers are being required by law to report on their activities.

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