State of Emergency

MANILA, Philippines—Malacañang is just doing its job.

Sen. Joker Arroyo Wednesday took the cudgels for Malacañang amid fresh calls from oil firms and big business groups to lift the price cap on fuel oil prices imposed by President Gloria Macapagal-Arroyo last month.

“Take the loss, share the loss during emergency,” Senator Arroyo said, referring to the oil firms.

“It is the height of callousness for foreign oil companies and their lackeys to continuously criticize without letup Executive Order No. 839, which temporarily regulates the price of oil products,” said Arroyo in a handwritten statement.

“To insist that come hell or high water, their prices must remain the same and damn the people, is unacceptable,” he said, even as he called on the Palace not to give in to big business’ demand to revoke EO 839.

The order froze oil prices at their Oct. 15 levels following the onslaught of storms that devastated Luzon.

The Joint Foreign Chambers of Commerce, Philippine Chamber of Commerce and Industry, Makati Business Club and Federation of Philippine Industries warned that the executive order would result in losses on the part of the oil firms, cut oil supply and serve as a disincentive to future investment.

The foreign chambers of commerce, whose members include major oil firms, said that a fuel price cap in Luzon would lead to lower fuel imports, shortages and a black market.

They said measures forcing suppliers to sell below cost would lead them to “cut volume to minimize losses.”

Bad economics

An economic adviser of President Macapagal-Arroyo said imposing price control on petroleum products was “bad economics.”

The price freeze only benefits members of the upwardly mobile class who could afford to drive their own cars and sport utility vehicles, according to Albay Rep. Joey Salceda.

Salceda said that 82 percent of the savings from fuel, light and water consumption arising from the oil price freeze and 90 percent of the savings from transportation and communications were being enjoyed by the rich or those with annual income of P100,000 a year.

Salceda said that based on the latest Family Income and Expenditure Survey (2006), Filipinos earning below P100,000 a year accounted for only 18 percent of fuel, light and water consumption and 10 percent of all spending for transportation and communication.

Rich benefit from EO

“The people savoring these savings are those who hardly need the assistance of the government for relief from the adverse effects of [Storms] ‘Pepeng,’ ‘Ondoy,’ ‘Ramil,’ ‘Santi’ and ‘Tino.’ Contrary to the common notion, the oil price freeze disproportionately benefits the wealthy families of Forbes, Magallanes and Urdaneta over the welfare of and at the expense of the informal settlers in Tondo, Payatas and Lupang Arenda,” Salceda said.

While the President had good intentions, he said she was not getting the effect she wanted and that she could be hurting the people she wanted to help in the first place.

Adverse impact

Salceda said the price freeze would adversely affect government tax collections considering that petroleum was the most heavily taxed and most consistent source of revenue of the government.

He estimated that the government would lose P4.5 billion in taxes due to the price freeze. “This would be borne essentially by poor households by way of lower cash flows that could have been earmarked for conditional cash transfers, health programs and scholarships,” he said.

Senator Arroyo defended EO 839, saying that two devastating calamities have created a national emergency of unthinkable proportions.

“The cost of oil has a devilish chain reaction on almost any product or transport. The government did not take over the oil business as the Constitution permits. After all, it cannot run the business. It simply ordered the reduction of oil prices for the duration of the emergency. At some point, the reduced price would be lifted,” he said.

The President has declared a state of calamity in Luzon.

Temporary

Arroyo, a lawyer, said the President was empowered to take over businesses in times of emergency.

“The Constitution in clear language permits it, thus: In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily takes over or direct the operation of any privately owned public utility or business affected by public interest,” he said, citing Section 17 of Article 12 of the Constitution.

Biggest money earners

Arroyo described the oil companies as among the biggest money earners year after year.

“Their supporters say that oil is a deregulated industry and therefore, it cannot be subjected to price fixing. Oil companies maintain that they can’t sell their products at a price lower than what it costs them,” he said.

He said that proposition was correct in normal times. “But in an emergency, it is correct for government to intervene. Failing that, the government fails the people,” he said.

The senator said that what the government asked was for the oil companies to take a loss, share the loss during the emergency.

“After all, when the emergency is over and the restrictions are lifted, they can raise their prices back to what they want and resume their hefty profits and recover the losses they bore during the emergency,” he said.

The senator then pointed to United States, which was recently faced with staggering economic and financial problems.

“The government intervened forcefully and imposed unheard of regulatory procedures and everyone agreed to a cut. Nobody complained. All hands were on deck,” he said.

Arroyo warned Malacañang against buckling down to pressure from the business community.

“The problem with this government is that it doesn’t know how to respond even when it is right. It is as if it has a guilty complex in whatever it does,” he said.

Fuel discount cards

Salceda said the President was more successful in addressing the previous oil crisis by issuing diesel discounts targeted at the transportation sector enough to keep fares at pre-crisis levels; giving discounted fuel access cards for lower-to-middle income families; and granting income transfers to poor families similar to the P500 electricity vouchers.

“The image of the DSWD (Department of Social Welfare and Development) distributing fuel discount cards to squatters in Payatas who obviously own no cars or the idea of welfare officers dispensing NFA (National Food Authority) rice access cards to investment bankers in Makati should disturb the nation about the unpleasant realities of EO 839,” Salceda said.

He recommended that the National Economic and Development Authority and the DSWD join the Department of Energy and Department of Justice in the review committee studying the price freeze.