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CHAPTER 8: Department of Energy Act of 1992 (Part II)

F. Downstream of Oil Industry Deregulation Act of 1996

Downstream Oil industry Refers to the business of exporting, re-exporting, transporting, processing, refining, storing, distribution, marketing and/or selling of all petroleum and crude oil products (crude oil, gasoline, diesel, LPG, kerosene, etc.) Under the deregulated environment, any person or entity may import or purchase any quantity of crude oil and other petroleum products from any foreign or domestic source

A. Antecedents of the Statute RA No. 8180 ended 26 years of government regulation of the downstream oil industry Pro-found background of the New Legislation (Tatad v Sec. of DENR)
No Government agency regulating the oil industry Oil Companies was free to enter and exit the market Country was driven to its knees by crippling oil crisis Oil Industry Commission (OIC) was created to regulate all activities of petroleum products This includes fix market prices of petroleum products President Marcos boldly created PNOC (Philippine National Oil Corporation) to break control on foreigners to our oil industry Later put up PETRON Corporation (first Filipino-owned oil company in the market) Marcos created OPSF (Oil Price Stabilization Fund) to cushion effects of changes in prices of oil OPSF may source funds from: a. any increase in tax collection from ad

Prior to 1971

Year 1971

November 9, 1973

Year 1984

Year 1985 May 1987

valorem tax or custom duty b. any increase in tax collection resulting from lifting tax exemption of govt. corporations c. any additional amount imposed on petroleum products d. any resulting peso cost differentials 3 companies operating in the market: Caltex, Shell and PNOC Aquino signed EO No. 172, creating the Energy Regulatory Board- regulate exporting of energy resources. Congress enacted RA No. 8180, Downstream Oil Industry Deregulation Act of 1996 2 Phases: A. Transition Phase lifted controls on nonpricing aspects of oil industry B. Full Deregulation Phase lifted prices of oil and forex and OBSF was abolished

March 1996

RA 8180 was held UNCONSTITUTIONAL Arbitrary and unreasonable because it was enacted due to the alleged depletion of OPSF Funds It allow the formation of a de facto cartel among existing oil companies Petron, Caltex and Shell Violations against Sec. 19 of Article XII of Phil. Constitution: o It espouses competition RA No. 8479 was enacted, known as Downstream Oil Industry Act of 1998

RA No. 8479 Policy of the state to liberalize and deregulate the downstream of oil industry To ensure truly competitive market under regime of fair price State shall encourage the entry of new participants to avoid monopoly

Liberalization of the industry Under law, any person or entity may import or purchase qty. of crude oil from a foreign or domestic source However, it is REQUIRED, to give prior notice to DOE for monitoring purposes And report to DOE every importation/exportation

Tariff Treatment Single and uniform tariff duty must be imposed both on imported crude oil and petroleum products at rate of 3% President may reduce tariff rate based from his personal judgment

Promotion of Fair Trade Price DTI and DOE are mandated to promote fair trade to avoid cartelization and monopoly of trade and any means of unfair competition in the Industry DOE shall monitor the relationship between oil companies and their dealers DOE is empowered to resolve any dispute which may arise to the contractual relationship between oil companies and dealers

Anti-trust Safeguards: To ensure fair competition and prevent cartels and monopolies Prohibits Cartelization means any agreement or concerted actions by refiners, importers to fix prices, restrict outputs or divide markets either by product or by areas Prohibits Predatory Pricing selling or offering to sell any oil product at a price below the sellers average variable cost for purpose of destroying competition Failure to comply on (1) submission of reportorial requirements; (2) use of clean and safe technologies; (3)order instructed by DOE; (4) registration of any fuel additive

Remedies a. Government Action - Join Task force was created to resolve any violation of Sec. 11 - It shall direct the prosecutors to institute actions to prevent restraints of such violations

b. Private Complaint - Any person or entity shall report any violations of Sec.11 to Joint Task Force - They may sue or obtain injunctive relief and damages before the proper court.