Law Summary
Declaration of Policy
- State policy to deregulate the downstream oil industry.
- Aim to foster a competitive market.
- Goals include fair pricing, continuous supply, and environmentally clean, high-quality petroleum products.
Coverage
- Applies to all persons/entities in the domestic downstream oil industry.
- Includes those importing refined petroleum products for personal use.
Definition of Terms
- Defines key terms such as "downstream oil industry," "DOE," "Board," "person," "petroleum," "crude oil," "petroleum products," "Wholesale Posted Price (WPP)," "Singapore Import Parity (SIP)," "Singapore Posting," and "Basel Convention."
Liberalization and Tariff Treatment
- Permits any person/entity to import, purchase, operate refineries, and market crude oil and petroleum products.
- Prior notice to DOE required for monitoring.
- Certificates of quality, health, safety, and environmental clearance still needed.
- Tariff duties imposed: 3% on crude oil, 7% on refined products except LPG and fuel oil (3%).
- Tariffs to equalize by 2004; changes only by Congress.
- NPC exemptions on taxes/duties apply to local purchases and imports.
Security of Supply
- DOE requires refiners/importers to maintain minimum inventory: 10% of annual sales or 40 days supply, whichever is lower.
Promotion of Fair Trade Practices
- DOE and DTI to promote fair trade, prevent cartelization, monopolies, and unfair competition.
- Some cooperative practices for public interest allowed (e.g., borrow-and-loan agreements, joint utilization).
Monitoring
- DOE must monitor and publish daily international oil prices.
- Monitor product quality; BPS sets quality standards aligned internationally.
- Monitor refining and marketing processes for environmental/worker safety.
- Maintain periodic inventory schedule.
- Mandatory monthly reports from importers, refiners, marketers.
- DOE-DOJ Task Force to act on unreasonable price hikes.
Prohibited Acts
- Cartelization and predatory pricing prohibited.
- Cartelization involves fixing prices, restricting outputs, dividing markets.
- Predatory pricing means selling below average industry cost to harm competitors.
- Penalties: imprisonment up to 3 years, fines from P500,000 to P1,000,000.
Other Prohibited Acts
- Failure to: submit reports, maintain minimum inventory, use safe technology.
- Penalties: imprisonment up to 2 years, fines from P250,000 to P500,000.
Transition Phase
- Deregulation in two phases: Transition (Phase I) and Full Deregulation (Phase II).
- OPSF claims condoned; buffer fund of P1 billion retained.
- Amendments to Petroleum Products Pricing and OPSF funding.
- Establish automatic oil pricing mechanism based on Singapore Posting.
- Board adjusts wholesale prices automatically using an approved formula without public hearing.
- Maintenance of current margins in transition phase; formula for margins may be issued.
Full Deregulation Phase
- Full deregulation to be implemented by DOE upon Presidential approval by March 1997.
- Preferably timed with favorable world market conditions.
- Repeal of superseded laws and executive orders.
- Board jurisdiction over piped gas pricing retained.
- Government will no longer provide foreign exchange forward cover for private importers post-deregulation.
- OPSF claims settled from buffer fund; excess goes to General Fund.
Final Provisions
- DOE, alongside other departments, to issue implementing rules within 60 days.
- Administrative fines up to P1,000,000 for noncompliance with reportorial and inventory requirements.
- DOE may recommend suspension or revocation of business permits for violations.
- Public information campaign to educate about deregulation.
- Budget appropriations taken from DOE funds.
- Separability clause ensures unaffected parts remain valid if one is invalidated.
- Repealing clause nullifies inconsistent laws, orders, or regulations.
- Act effective 15 days after publication in two newspapers of general circulation.