FOURTEENTH C~NGRESS 
1 
First Regular Session 
) 
REPUBLIC OF THE PHILIPPINES 
) 
I 
SENATE BILL NO. 
EXPLANATORY NOTE 
Republic Act 8479 was enacted in 1998 to replace Republic Act 8180, 
otherwise known as the ”Downstream Oil Industry Deregulation Act of 1996,” 
which was declared unconstitutional by the Supreme Court 
After nine years, many sectors are clamoring for the scrapping of RA 8479 
for the following reasons: 
1. 
2. 
3. 
4. 
5. 
6. 
The present conditions in the oil industry do not show that it is really 
regulated as oil companies continue to operate as cartels. 
Oil companies have continuously failed to explain the mechanisms they 
use in setting oil prices and its relation to the crude oil world market 
and to the foreign exchange rate. 
Deregulation has failed to bring down oil prices. 
The oil deregulation system has failed to check the unilateral move of 
oil firms to dictate prices of oil. 
Oil companies engage in intense speculation in the future price of oil, 
thus affecting the increase of oil prices. 
Large companies still have the largest share in the market. 
Carlos Valdes 111 in his study, ”The truth about the oil crisis,” (Executive 
Alert, December 23,2004) wrote about the financial speculation of oil in the world 
market, to wit: 
The oil spot market was created in 1969 by the LazardlRothschild-allied Philipp 
Brothers, then the world’s largest metals trader. Philipp Brothers, largely in the 
person of their top trader Marc Rich, began by selling small quantities of 
Iranian crude oil to independent refiners. 
The oil shocks of 1973 and 1979, which were orchestrated by the financier 
oligarchy under the cover of the OPEC oil embargo and the fall of the Shah in 
Iran, resulted in a shift in oil pricing awayfrom long-term contracts toward the 
Rotterdam-based spot market. 
By “spot“ is meant that one buys the oil at a market unly 24-48 hours before 
one takes physical (spot) delivery, as opposed to buying it 12 or more months in 
advance. In effect,.the spot market inserted a financial middleman into the oil 


patch income stream in much the same way that deregulation would later do for 
electricity. 
Today, the oil price is largely set in the futures markets. The two principal 
locales which dominate oil futures trading are the London-based International 
Petroleum Exchange (IPE), established in 2980, and the New York Mercantile 
Exchange (NYMEX), which is more than a century old, but also first started 
trading oil futures in 1983. 
Traders call futures contracts “paper oil“: the contracts are a paper claim 
against oil, which is far in excess of the volume of oil pvoduced and actually 
delivered at oil terminals on behalf of fhose contracts. 
The traders transact a large volume of derivatives bets. Speculators purchase on 
the IPE and NYMEX exchanges, futures conhacts; each single contract is a bet 
on 1,000 barrels of oil. More than 100 million of these oil derivatives contracts 
were traded on these exchanges in 2003, representing 100 billion barrels of oil. 
In a year 2000 study, Executiwe Intelligence Review (EIR) showed that on the 
IPE, for every 570 ”paper barrels of oil” - that is futures derivatives covering 
570 barrels - traded each year, there was only one underlying physical barrel of 
oil. The 570 paper oil contracts pull the price of the underlying barrel of oil, 
manipulating the oil price. v t h e  speculators bet long - that the price will rise - 
the mountain of bets pulls up the underlying price. 
But worse, there is a second layer of leverage. At the London IPE, the 
speculator can buy afutures contract on a margin of 3.8%. That is, were the 
speculator to buy a single futures contract, representing 1,000 barrels of oil at, 
say, an oil price of $40 per barrel, then the contract represents $40,000. 
However, the speculator pays only $2,520 for the premium of the contract -or 
3.8% of the $40,000 -which gives him control over the contract. 
Through an investment of$1,520, the speculator controls 1,000 barrels of oil. A 
small group of speculators, through leverage, control the world oil price. A 
NYMEX document, “How the Exchange Works,” boasts that it has nothing to 
do with oil production. “Yet the buying and selling on the Exchange occurs 
amid the winding streets of the oldest section of New York, with nary an oil 
well or copper mine in sight. In fact, many thousands of transactions conducted 
on the Exchange each day are accomplished without the participants ever seeiizg 
a gallon of heating oil.” 
Consider tke IPE, which was created in 1980. Today, the IPE is run by a 
Knight of the British Empire and former Royal DutchlShell official, Sir Robert 
Reid, and has a hoard which includes Lord Fraser of Carmyllie, representatives 
of Goldman Snchs, Morgan Stanley, BNP Paribus, Credit Lyonnais, and 
French oil giant Total. 
The present government has resisted widespread calls to re-regulate the 
downstream oil industry in the wake of seemingly endless rounds of oil price 
2 


hikes since its deregulation in 1997. Pump prices of gasoline increased by 283% 
and diesel by 347% from 1997-2006, with the largest increases of 138% recorded in 
the last six years since 2001. 
The government’s continued imposition of these burdensome policies only 
underlines its adherence to the dictates of powerful foreign transnational 
corporations and their mega-profits over the welfare of Filipinos. In fact, the three 
biggest oil corporations in the country declared a combined net income of P48 
billion ($960 million) from 2001-2005. 
The repeal of the Oil Deregulation Act will end the cartel-like operation of 
the three major oil players and ease the burden on the suffering FiIipino. 
The approval of this bill is earnestly requested. 
3 


V 
AN ACT 
REPEALING REPUBLIC ACT 8479 OTHERWISE KNOWN 
AS THE "DOWNSTREAM OIL INDUSTRY DEREGULATION ACT OF 1998" 
Be it enacted by the Senate and the House of Representatives in Congress assembled: 
Section 1. Short Title. - This Act shall be known as the "Act Repealing Republic 
Act 8479, otherwise known as the Downstream Oil Industry Deregulation Act of 
1998." 
Section 2. Any provision of law to the contrary notwithstanding, Republic Act 
8479, otherwise known as the "Downstream Oil Industry Deregulation Act of 
1998 is hereby repealed. 
Section 3. This Act shall take effect fifteen (15) days after its complete publication 
in a newspaper of general circulation. 
Approved, 
4