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.