FOCUS: A years after the oil industry's liberation Only two options: Innovate or be left out in the race

skips from one station to the other to look for the cheapest diesel for the week. And there’s no trouble looking for the gasoline stations’ latest promotion... a free mini-car model, a chance to win a trip abroad or millions of pesos in cash.

Exactly a year after the petroleum industry was deregulated, consumers have undeniably been the “winner” in introducing competition in an industry historically dominated by the Big Three... Petron Corp., Pilipinas Shell Petroleum Corp. and Caltex (Phils.), Inc.

“Price competition is evident as seen in the movement in local prices vis-a-vis that in the world market. Choices have been expanded both in terms of service and products. It ( the industry) has been on the right track and still is positive a year after,” said Energy Undersecretary Cyril del Callar, who was part of the team which lobbied for the immediate passage of Republic Act No. 8479, or the Downstream Oil Industry Deregulation Act, during the Ramos administration.

RA 8479 replaced RA 8180, or the original oil deregulation law which the Supreme Court declared as unconstitutional due to three provisions that allegedly “promoted monopoly and unfair competition.”

RA 8479 scrapped the unconstitutional provisions on tariff differential and minimum inventory requirement as these were disincentives to new investors.

Mr. Del Callar said the new entrants have continued to come notwithstanding the financial crisis. To date, significant new investments in bulk storage, liquefied petroleum gas (LPG) refilling and petroleum product retailing have been generated with the entry of 30 new companies last year. Six new companies are operating 33 gasoline stations, while others are still under construction. These investors have earlier vowed to put in as much as P17 billion in the next three years.

For Total Philippines Petroleum Corp. (TPPC) and Unioil Corp., the oil sector is “more vibrant” with the entry of new investors like them.

TPPC is the local subsidiary of French firm Total, while Unioil is a Filipinoowned company. The two are considered the more aggressive among the new ones as they are slowly and constantly building up their lists of retail service stations in Metro Manila and Luzon. “The entry of new players has stimulated the Big Three into improving their services, reimaging their retail network, reducing wholesale prices in reaction to drops in crude costs and strengthening of the peso, initiating sales promotions... all to the benefit of the oil consumer,” said Total official Rona Quejada. For Unioil, competition has set in more evidently in major bulk oil contracts such as those offered to major and industrial customers like the National Power Corp. (Napocor). Just last week, a major bidding for the state-run power firm’s P7billion fuel supply requirement was held. New firms like Total,

Unioil and several others participated with the Big Three. Sources said the bid offers were competitive. “Most amazing,” however, were the prices Petron offered which were reportedly 50% to 100% lower than the rest. “How’d they do that?” was the question that remains to be answered, although Petron officials said the price bid was not a losing proposition on their part.

“Prior to the oil deregulation, bid prices submitted by the oil majors were relatively high. With the deregulation and presence of new players, the bid prices has drastically gone down. You can deduce from the price dive made by Petron if the price adjustments made by the oil majors are reasonable or not or if they are still overpricing their products,” said Unioil legal officer Lawrence Luang.

Just like the retail and wholesale customers, the oil companies feel the government is as equally victorious.

“Our policy makers had the number one objective behind deregulation of getting government out of the business of regulating, and side- by- side subsidizing the industry. As far as these are concerned, they have been fully served,” Shell President Oscar Reyes said in an interview.

For a year now, the government did not subsidize the industry when the foreign exchange and world crude prices fluctuate as these added costs could now be easily passed on to consumers. Gone were the days when a buffer fund... the Oil Price Stabilization Fund (OPSF)... had to be replenished.

Prior to deregulation, the government owed the Big Three some P2.6 billion in unpaid claims to the OPSF. With RA 8479, the government had no choice but to reimburse the oil firms through a tax rebate scheme for their customs and tax duties. These claims will be fully paid before the year ends, eventually wiping out all payables to the OPSF.

Based on government estimates, the entry of new investors has been significant to cause changes in the industry’s pie. The new firms now corner 5% of the total market and 10% of the lubricant sector.