RP declares full oil sector deregulation

RP declares full oil sector deregulation

MANILA (Reuters): The Philippines declared full deregulation
of the nation's oil industry on Saturday, allowing oil companies
to set pump prices for all but three products.

President Fidel Ramos signed Executive Order No 471 declaring
deregulation of the downstream petroleum industry, effective
immediately.

An oil reform law signed last February had prescribed a five-
month transition period to full deregulation during which the
Energy Regulatory Board (ERB) would regulate price adjustments
once every month.

But the law also gave Ramos the authority to shorten the
transition period.

Full industry deregulation is one of the major structural
reforms the country must undertake before it can exit from
International Monetary Fund supervision. Manila is working
towards an exit by the end of the month.

The law threw open the domestic oil industry, which has been
dominated by three giant companies, to new players.

"Fears from certain sectors, especially from militant groups,
that deregulation will favor the three big sisters... have no
basis since they will be forced to follow up the flow of the free
market forces and face competition coming from new players,"
Ramos said in a statement.

The firms are Saudi Aramco-backed Petron Corp, Pilipinas Shell
Petroleum Corp, a subsidiary of Royal Dutch Shell Group, and
Caltex Corp, a joint venture between Chevron Corp and Texaco Inc.

Ramos, citing declining world crude prices and a stabilizing
peso, allowed unregulated price adjustment, except for liquefied
petroleum gas, regular gasoline and kerosene, which are used
mostly by the poor.

Prices for these three products will still be regulated by the
ERB and subsidized by the state.

The Department of Energy, which recommended the immediate full
deregulation, said in a statement that the coming spring season
in the northern hemisphere would weaken petroleum demand.

An economic slowdown in Southeast Asia and a stable supply of
Iraqi oil under a United Nations-sponsored food-for-oil agreement
would have also contributed to a further drop in crude prices.

"These factors are expected to minimize upward pressure on
prices of these products in the next few months, notwithstanding
the historically based cyclical upward adjustment beginning the
third quarter of the year," the department said.