THE NEWS DATELINER

Adviser seeks palace lift of oil price ceiling

By Rey M. Nasol


LEGAZPI CITY – The close economic adviser of President Gloria Arroyo has criticized the oil price free in Luzon area as a pro-rich move and has sought for its reconsideration to save the poor from the overwhelming effects of calamities compounded by the oil price problem in the country.

This move was seconded by militant groups in Bicol such as the Bayan Bicol and the Pinagisang Samahan ng mga Tsuper at Operations Nationwide and the Concerned Drivers and Operations for Reform (Condor-Piston).

Albay gov. Joey Salceda said that he believes the Executive Order 839 or the oil price freeze in Luzon area will not help solve the problem on oil prices in the country.

“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 told this writer.

Using the 2006 (latest) Family Income and Expenditure Survey (FIES), 82 percent of the savings on fuel, light and water arising from the oil price freeze and a monstrous 90 percent of the savings on transportation and communications are being savored by the rich, particularly those earning over P100,000 per year who hardly needs the assistance of the government for relief from the adverse effects of Pepeng, Ondoy, Ramil, Santi and Tino.

Salceda said that the lower 45 percent income class who earn less than P100,000 annually consumes only 18 percent of total expenditures on fuel, light and water and a measly 10 percent of total expenditures of transportation and communications.

Aggravating the impact on the income distribution are the tax losses of the oil price freeze due to lower prices (12% Reformed Value-Added Tax or RVAT) and losses of oil companies (30 percent on income tax).

“In the case of Petron alone, with 30 percent market share, its projected loss of P1.5billion in the fourth quarter of 2009 from an income of P1.25billion suggests income tax fallout of P1.2billion! Easily, we reckon foregone taxes of at least P4.5billion from the oil price cap,” Salceda said.

Besides, given the expenditure incidence of the national government budget, 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 Salceda explained.

Banner programs of PGMA during the oil crisis and the rice price crisis have already proven to work well and accomplish better the intended benefits of EO 839 while avoiding the costs of short-term supply disruptions and long term distortions on resource allocation.

These are: diesel discounts targeted to transportation sector enough to keep fares at pre-crisis levels. This would be cheaper for oil firms shoulder; discounted fuel access cards for lower-to-middle income class families very much like the National Food Authority (NFA) access cards administered by the Department of Social Welfare and Development (DSWD) which the government could also ask the oil firms to underwrite and income transfers to poor families very much like the P500 electricity vouchers.

“The image of the DSWD distributing fuel discount cards to squatters in Payatas who obviously own no cars or the idea of welfare officers dispensing NFA rice access cards to investment bankers in Makati should disturb the nation about the unpleasant realities of EO 839,” Salceda pointed out.

At the very least, it is desirable that the Joint DOE-DOJ (Department of Energy-Department of Justice) review committee should be expanded to include the National Economic and Development Authority (NEDA) and DSWD to bring a broader perspective to its deliberation of the issue.

On the other hand, Tessa Lopez, the regional Public Information Office of the Bayan-Bicol said that the EO 839 has further weakened Arroyo’s popularity because of its senseless effect to the public and bounced back to her sincerity to really help the poor.

“The capitalists are controlling the law on supply and demand. The EO 839 would never really solve the problem and in effect drove the oil firms to divert the supply to areas not covered by the ruling such as Visayas and Mindanao, thereby giving the firms more room for profits while creating artificial shortage in the Luzon areas,” Lopez explained.

“It is good for Ms. Arroyo to advocate for the lifting of the Oil Deregulation Law and regaining Petron’s leverage to the market and thereby boost her popularity if people start to feel the sincerity of her administration,” Lopez added.

“The price control on oil did not really make us feel that the government did something to the prices of oil because instead of lowering the price, we faced the problem of possible shortage of supply, what will you do with your money if there is no fuel to run your vehicle?” Joel Ascutia of the Condor-Piston said on Friday. (Rey M. Nasol)