[sustran] Re: Petroleum product pricing/deregulation

[HARIAS]

Dear Sustran-discuss participants, 

Here's just to share a few energy policy experiences here in the 
Philippines -- 

Some distortions in petroleum product prices have been 
caused by the use of an overvalued rate for the peso and by the 
influence of various policy priorities on energy taxes. On grounds of 
social equity, taxes on gasoline (used by high-income people) have 
been relatively high and taxes on kerosene and liquefied petorleum 
gas (used by low-income people) have been relatively low.  Taxes on 
fuel oil have also been relatively low in order to hold down 
industrial production costs.

Recently, the downstream oil industry was deregulated and during its 
transition phase the following impacts were experienced:

a. On price of electricity
    
   The effect was minimal. the full effect of fuel price adjustments 
are usually offset by changes in the generation mix, prudent fuel 
purchases and increased power plant operational efficiency.

b. On inflation

   In the breakdown of the Consumer Price Index shows that fuel, 
light and water contributed 4.2% to the inflation rate, which is 
higher than it did in 1995 but less than the 1994 level.

    The increase in gasoline and diesel prices posted a slight 
increase in the Services index while drops in kerosene and LPG prices 
posted a decline in fuel, light and water indices. 

c. On prices of commodities

    Price Tag Law is applied and monitoring of prices of basic 
commodities is being undertaken by the Department of Trade and 
Industry to curb unreasonable price fluctuations in the marketplace. 
This resulted in a situation where average prices of some basic 
commodities and agricultural products have actually remained and even 
decreased over the past year. It is essential that there should 
be proper coordination and monitoring and the full vigilance of the 
government and consumers to prevent undue panic and hoarding.  

d. On transportation

    A fare hike was issued to cover the increase in the price of 
diesel but the  last two adjustments in its price amounting to 86 
centavos have a minimal impact in the fare of around 1 1/2 centavo 
per kilometer. 

The benefits of deregulation as indicated in our primer are: stable 
and reasonable prices; real prices fo petroleum products will be 
reflected; better value for consumers; more investments; and 
availability of clean, environment-friendly fuels. 

This is my initial contribution to the group. If you have any 
questions, please feel free to contact me.


Helen Arias