The Folly of the Oil Deregulation Law and the Intellectual Bankruptcy of Its Statist Opponents

  • From my Formspring account.  Someone asked this question: “What can you say about the Oil Deregulation Law?”
You cannot help others, especially the poor, by advocating the use of arbitrary force.You cannot help others, especially the poor, by advocating the use of arbitrary force.

I honestly didn’t fully study/cover the complex legal ramifications of this recurring issue. This blog article is going to focus mainly on basic, fundamental principles since these are what the country’s intellectuals and politicians take for granted nowadays. I’m aware that the alleged purpose of the Oil Deregulation law is to decontrol or deregulate the country’s oil industry. This claim should be confronted with the question– “oh really?”

I believe that this measure or edict, which is highly paradoxical, is a mockery of justice, of the true essence of free and open competition, of the free market system, and of reason. It is a clear manifestation or symptom of the worsening intellectual bankruptcy and culture of mediocrity in this country. The law purportedly aims to deregulate the oil industry in order to guarantee market competition in the oil sector, thereby lowering the prices of petroleum/oil products. I say, anybody who truly understands the link between politics and economics should laugh at the hypocrisy and intellectual bankruptcy of those who crafted this law. But does that mean I oppose this measure? I don’t, but allow me to objectively clarify my stand and explain the complex ramifications of this issue.

Calls for the immediate amendment, or even repeal, of the infamous Oil Deregulation Law resurfaced this year after transport groups, pressure groups, and the country’s progressives/liberals/leftists/statists complained against the inexorable increases in fuel prices. With this, the populist Aquino administration, which is so concerned with high popularity/approval ratings, ordered its legal and intellectual minions to review the notorious law with the intent of amending or even repealing it.

Fortunately, Pres. Noynoy Aquino came up with a surprising statement in May. The President opposed the proposed repeal of the law, saying this will only make fuel prices artificially low. He’s right! The government cannot issue price controls or control prices of oil products/commodities when domestic oil prices are clearly, undeniably dictated by world oil prices.” The logic here is: the government cannot order oil companies to sell at a loss.

“It is very nice to hear if we scrap the Oil Deregulation Law. But how can we do that if world oil prices are really on the uptrend? Where will we get the money to pay for the difference between the crude sold and our actual imports,” Pres. Aquino said.

Without a doubt, underlying purpose of the anti-deregulation law advocates is to convince the government to regulate the country’s oil industry, to issue price controls, and to put limitations on the profit of oil companies. What a very bold, desperate, and I say, highly dangerous, proposal!

There’s this disturbing opinion piece written by veteran PDI columnist Neal Cruz titled “Amend Oil Deregulation Law, end opportunism”. My initial reaction to the columnist’s statist anti-deregulation law diatribe: “Oh really”?

Cruz, in his column dated September 15, ends his opinion piece with the following conclusion:“The Philippine government abdicated its responsibility when it prematurely deregulated the oil industry. It did not want to be blamed by the public for fuel price increases, but it also did not want to subsidize these increases. So it threw the public at the mercy of the oil companies and said, “Bahala na kayo.” That is not how a responsible and caring government should behave. It should protect the people from opportunists like the oil companies. It owes the people that much for the taxes they pay, the same taxes that allow public officials to enjoy fat salaries and allowances and luxurious lifestyles.” 

I believe Neal Cruz’s anti-deregulation law arguments/premises sum up the mentality/advocacy of the entire pro-regulation fanatics in this country composed of both hardcore leftists and mild statists who simply want government regulations and welfare state.

Based on his absurd statement, Cruz wants the Aquino administration to adopt and/or implement populist, regulatory policies to “protect the people from opportunists like the oil companies”. The people’s enemies, according to Cruz, are the opportunistic multinational oil companies that continue to “raise prices at will.”

Also, Cruz’s arguments show that he favors the implementation of socialistic, populist policies, such as anti-trust law, price controls, economic regulations, etc. so to serve the greater good.

He talks about the government that “abdicated its responsibility when it prematurely deregulated the oil industry.” The law was passed during the term of former Pres. Fidel V. Ramos. But what if the Ramos administration didn’t pass the law? Without it I believe we would have suffered unimaginable economic and political crisis for the past years. If Pres. Ramos didn’t deregulate, the entire oil industry would have been heavily regulated/controlled, thus driving existing multinational oil companies and discouraging foreign investors from doing business in the country. As a result, we would have higher prices of commodities (since they all depend on fuel prices), runaway inflation, chronic lack of investment (both domestic and foreign), extremely high unemployment rate, and definitely deep fiscal and economic- or even political- crisis, a situation that’s favorable to the communists.

The Oil Deregulation Law merely served as a temporary panacea to the country’s main crisis/problem- that is, the root of the crisis- created by the government. What is this crisis I’m talking about? It’s the great crisis created/caused by the 1987 Constitution.

The New Charter establishes institutionalized protectionism and supports government regulations and intervention into the economy in the name of public welfare or the greater good. The mere fact that the government had to deregulate the oil industry confirms the populist/statist/protectionist nature of the Constitution.

Foreign investors/businessmen are not allowed by law to own 100 percent equity in land and businesses in our country when Filipinos are allowed to own land, houses, businesses in America and other countries. Foreign professionals are also barred from practicing their professions due to constitutional restrictions when we all know that Filipino doctors, nurses, engineers, teachers, etc. are allowed to practice their respective professions abroad. Since  we are in breach of the principle of reciprocity in international law, freer economies that allow 100 percent foreign equity should also deny/refuse Filipinos the same privileges or opportunities that our Constitution denies to foreigners. Apart from that, the government is constitutionally empowered to regulate certain industries and sectors at will in the name of the greater good. We have more taxes and high tax rates. Fortunately, former President and now Representative Gloria Arroyo lowered corporate income tax before her term expired.

Yes, we clearly deserve our fate. We deserve to suffer. We deserve to die as a nation. We have no way out if we continue to sustain and embrace the current mediocre, suicidal political system and trends.

What do these crucial issues mean? They imply/mean the following truths/realities about our economy and political system:

  1. The government is the source- the only source- of monopoly in this country. All monopolies and cartels were created by the Constitution and/or the government (e.g., PAGCOR, NFA, the public education sector, the health care sector, NAWASA, PAG-IBIG, MWSS, etc.)
  2. The oil cartel in the country was created– and is sustained- by our protectionist constitition and political-economic system.
  3. The government’s protectionist policies and regulations favor the country’s oligarchs who strongly oppose economic freedom and the opening of our economy to foreign investors through constitutional reform/revision. These oligarchs clearly benefit from our protectionist, regulatory political-economic system.
  4. There is no real competition in this country. This means that to implement the proposed anti-trust law is another mockery of justice, reason, and the free market system.
  5. All economic crises that we confront today and in the past (e.g., higher unemployment rate, inflation, devaluation of the peso, low foreign direct investment, high fiscal and budget deficit, among others) were created by the government through its protectionist/regulatory, failed policies.

This is why I stated above that the Oil Deregulation law is, in truth and in reality, a travesty of justice- a mockery of reason and objective law- an insult to the free market system and real competition- and the symptom of our intellectuals’ and leaders’ intellectual bankruptcy.

We all know what the anti-deregulation law statists want and demand. They want and demand lower oil/fuel prices. We cannot question their good intentions, but good intention is the most exaggerated and most abused ‘virtue’ nowadays. Their proposal to regulate the oil industry simply shows their anti-conceptual, anti-intellectual mentality. In fact, it’s an implied admission- or an assertion- that the source of wealth is the government, not the private sector. Their statist/regulatory proposal postulates that the government can serve the greater good and solve certain problems (e.g., high prices of goods, unemployment, etc.) by simply passing laws or edicts that control/regulate certain “opportunistic” industries or businesses.

The source of wealth is the private sector. That is, the true source of money and wealth, which is the prime-mover of the economy, is every man’s willingness and capacity to work, to produce/deliver goods and services that other people need and want, to survive, and to deal with other men by trade and not by compulsion. Force or compulsion is what the government does to serve the greater good, or in the words of Neal Cruz, to “protect the people from opportunists like the oil companies.”

No, Neal Cruz and all pro-regulation statists, you cannot help others, especially the poor, by advocating the use of arbitrary force. History has it that if the government used force against the oil industry or other sectors, it would only achieve the opposite.

If you want lower oil prices, then the solution is very simple: support economic freedom in the Philippines, not the legalized strangulation of business. Yes, you should advocate for the opening up of our protectionist, highly regulated economy to foreign investors to allow and attract more investors through constitutional reform. The so-called oil cartels and other cartels you all seek to abolish were all established and supported by the current political system- by the government – and by the Constitution. Thus, if you want a progressive, economically stable Philippines, you should support economic freedom, deregulation, removal of protectionism, lower taxes, and objective rule of law. Why not check your flawed premises? Try to look at it this way: it’s the government that must be- and ought to be- regulated and controlled, not industries or the private sector. Freedom from government intervention is what this country badly needs!


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