Republic of the Philippines

Bouse of Representatives
Constitution Hills, Quezon City

Fifteenth Congress
Second Regular Session

4893

Introduced by HON. ROMEO M. ACOP

EXPLANATORY NOTE

In the 1990's, the country began experiencing a power crisis which slowed down the
economy and prodded the goverment to initiate major reforms to rehabilitate the energy sector.
The crisis was being aggravated by a growing deficit in the Oil Price Stabilization Fund (OPSF)
which has ballooned to P 8.3 billion in 1998, then threatening the fiscal stability of the economy.
The OPSF, being tied up to the highly political nature of oil prices, was the mechanism used by
the govemment to defer price increases as much as possible in order to avoid public protest
even at the expense of incurring a fiscal deficit. Deregulation of the oil industry was thus seen
as the solution to the recurring deficit and to the vulnerability of the economy from price shocks
due to its heavy dependence on imported oil

Republic Act No. 8479, otherwise known as the ‘Downstream Oil Industry Deregulation
Act of 1998’, declares as state policy the deregulation of the oil industry to foster a truly
competitive market which can better achieve the social policy objectives of fair prices and
adequate, continuous supply of environmentally-clean and high quality petroleum products. It
was meant to enhance market competition and private investments while freeing the
government of costly subsidies on oil products. Most significantly, it means that the government
does not interfere with the pricing of petroleum products. Since then, the govemment no longer
has effective control over the industry except to monitor. The law mandates the Department of
Energy (DOE), the Department of Trade and Industry (DTI), the Department of Science and
Technology (DOST) and the Department of Environment and Natural Resources (DENR) as the
monitoring agencies of the govemment

Consequently, oil companies took advantage of the policy hiking pump prices of
petroleum products by around 535% since the enactment of the Oil Deregulation law in 1998.
Apparently, it failed to solve, or at least mitigate, the effects of the global oil crisis. Prices have


remained volatile upwards and sticky downwards vis-a-vis price movements of petroleum
products in the world market. Worse, it appeared that the deregulation policy even strengthened
the monopoly of the oil companies as automatic oil price hikes are allowed. In the face of
surging oil prices, calls have been sounded both by civil society and policy makers for a re-
examination of the Oil Deregulation Law and for legislative amendments to provide for tighter
mechanisms on the oil companies’ price adjustments. Concems have arisen on whether local
industry oil players were accurately reflecting international price movements. Currently, there is
no formula for what constitutes “reasonable pricing’ as basis for price adjustments,

Hence, the need to ensure transparency in the pricing of petroleum products by the oil
companies in the local industry, and to determine the computations or assumptions employed
by them in their price adjustments to prevent oil companies from engaging in unwarranted
profiteering.

This bill seeks to ensure transparency in the oil industry pricing by requiring the
submission of book of accounts and other financial documents of oil companies, including their
verified assumptions and computations used in the determination of price adjustments in the
petroleum products. Submission of these documents is mandatory and non-compliance will be
punishable under the existing provisions of the law. Furthermore, the proposed measure
Mandates the Department of Energy (DOE) as part of its monitoring task to determine other
factors that cause or contribute to the increase or decrease of oil prices. On the basis of these
documents and data, the DOE is directed to evaluate the necessity of such price increases or
decreases, and the reasonability of the amounts of increase or decrease, as the case may be.

As a deterrent, the bill declares unlawful for oil companies to engage in unwarranted oil
price increases, or unreasonable amounts of price increase or decrease as may be determined
by the DOE and provides for the imposition of penalties in the present law against erring oil
companies and officials

Finally, to strengthen the Task Force created under Section 14 of the law tasked to
investigate and file complaints against unreasonable rise in the prices of petroleum products,
this bill seeks the inclusion of the Commission on audit (COA) in the Task Force together with
the Departments of Energy and Justice. The COA as an independent body will enhance the
credibility of the Task Force. The Commission, with its auditing and accounting expertise, will
also fortify the capability of the Task Force in scrutinizing the financial documents and reports of
the oil companies.

For the foregoing reasons, the immediate passage of this bill is earnestly sought.

ROMEO M. AgOP, MNSA
fepresentative


Republic of the Philippines
Bouse of Representatives

Constitution Hills, Quezon City

Fifteenth Congress
Second Regular Session

4893

House Bill No.

Introduced by HON. ROMEO M. ACOP

AN ACT
TO ENSURE TRANSPARENCY IN PRICING IN THE OIL INDUSTRY AND FOR OTHER
PURPOSES, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 8479,
OTHERWISE KNOWN AS ‘AN ACT DEREGULATING THE DOWNSTREAM OIL
INDUSTRY’

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled :

SECTION 1. Section 12 of Republic Act No. 8479, otherwise known as an ‘An Act
Deregulating the Downstream Oil Industry’ is hereby amended to read as follows :

SECTION 12. Other Prohibited Acts - To ensure compliance with the
provisions of this Act, the refusal to comply with any of the following shall likewise
be prohibited

(a) Submission of BOOKS OF ACCOUNTS, FINANCIAL DOCUMENTS AND
[any] OTHER reportorial requirements SUCH AS BUT NOT LIMITED TO
VERIFIED REPORTS OF THE COMPANY’S ASSUMPTIONS AND
COMPUTATIONS IN THE PRICING OF THEIR PETROLEUM PRODUCTS,
WHETHER IN THE PROCESSING, REFINING, SALE OR DISTRIBUTION
OF SAID PRODUCTS, RELEVANT TO ENSURE THAT OIL COMPANIES
ARE NOT INVOLVED IN PROFITEERING;


(0) 2000
(©) 2200
(d) 2000

IT SHALL LIKEWISE BE UNLAWFUL TO CAUSE THE UNNECESSARY
INCREASE IN THE PRICES OF PETROLEUM PRODUCTS, OR CAUSE AN
UNREASONABLE AMOUNT OF INCREASE OR DECREASE IN THE SAME
UNDER SECTION 14 OF THIS ACT.

Any person, including but not limited to the chief operating officer or chief
executive officer of the partnership, corporation or any entity involved, who is
found guilty of any of the said prohibited acts shall suffer the penalty of
imprisonment for two (2) years and a fine ranging from Two Hundred Fifty
Thousand pesos ( P 250,000 ) to Five Hundred Thousand pesos ( P 500,000 ).

SECTION 2. Section 14, paragraphs (a) and (d) of Republic Act No. 8479, otherwise
known as an ‘An Act Deregulating the Downstream Oil Industry’ are hereby amended
to read as follows :

SECTION 14 Monitoring -

(a) The DOE shall monitor and publish daily international crude oil prices, as well
as follow the movements of domestic oil prices. IT SHALL DETERMINE
THE FACTORS WHICH CAUSE THE INCREASE OR DECREASE IN THE
PRICES OF PETROLEUM PRODUCTS, EVALUATE THE NECESSITY OF
THE INCREASE OR DECREASE IN THE PRICES AND THE
REASONABILITY OF THE AMOUNTS OF INCREASE OR DECREASE
BASED ON THE ACTUAL CONDITIONS OF THE MARKET AND OTHER
CAUSATIVE AND CONTRIBUTORY FACTORS AS DETERMINED BY IT.

It shall likewise monitor the quality of petroleum products and stop the
‘operation of businesses involved in the sale of petroleum products which do
not comply with the national standards of quality that are aligned with the
national standards / protocols of quality. The Bureau of Product Standards of
the DTI, together with the Department of Environment and Natural Resources
(DENR), the DOE, the Department of Science and Technology (DOST),
Tepresentatives of the fuel and automotive industries and the consumers,
shall set the specifications for all types of fuel and fuel-related products to
improve fuel composition for increased efficiency and reduced emissions.
The BPS shall also specify the allowable content of additives in all types of
fuels and fuel-related products.

(b) 0000

(0) x00K


(d) Any report from any person of an unreasonable [tise] INCREASE OR
DECREASE, AS THE CASE MAY BE, in the prices of petroleum products
shall be immediately acted upon. For this purpose, the creation of the DOE-
DOJ-COA Task Force is hereby mandated to determine within thirty (30)
days the merits of the report and initiate the necessary actions warranted
under the circumstances: Provided, that nothing herein shall prevent the said
task force from investigating and/or filing the necessary complaint with the
proper court or agency motu propio.

Upon the effectivity of this Act, the Secretaries of Energy and Justices AND
THE CHAIRMAN OF THE COMMISSION ON AUDIT (COA) shall jointly
appoint the members of THE TASK FORCE [a committee who] WHICH
shall DRAFT AND ADOPT [be tasked with the drafting of the ] ITS rules and
guidelines [ to be adopted by the Task Force ] in the performance of its duty.
These guidelines shall ensure the efficiency, promptness, and effectiveness
in the handling of its cases. The Task Force shall be organized and its
members appointed within one (1) month from the effectivity of this Act

(e) xox

SECTION 3. Implementing Rules and Regulations - The Department of Energy, in
coordination with the Department of Justice and the Commission on Audit, shall
formulate and issue the necessary rules and regulations within sixty (60) days from the
effectivity of this Act.

SECTION 4. Separability Clause - If, for any reason, any section or provision of this
Act is declared unconstitutional or invalid, such parts not affected thereby shall remain
in full force and effect.

SECTION 5. Repealing Clause - All laws, executive orders, issuances, rules and
regulations or parts thereof, which are inconsistent with the provisions of this Ac are
hereby repealed or repealed accordingly.

SECTION 6. Effectivity Clause - This Act shall take effect upon its complete
publication in at least two (2) newspapers of general circulation.

Approved.