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

October 1, 2011
  • 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 shooing existing multinational oil companies away 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. There is no such thing as oil cartel or oil monopoly, including other private monopolies/cartels, in the Philippines.
  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 and are being caused by the government and its protectionist/regulatory 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!

12 Comments leave one →
  1. October 4, 2011 3:38

    Super post. Some good points you highlight in there.

  2. October 4, 2011 3:38

    We have the same thing in Canada. One thing to consider. Hardly anyone ever talks about how much tax is on fossil fuel. In Canada, The tax is incalculable. The “official” amount of tax is about 70%, but there is about 30% income tax on the money you use to buy it and there is tax on almost everything you need to earn the money. So how much is the tax? No conversation about deregulation of the Oil Industry is complete without talk of heavy reduction/elimination of tax. People here say the same thing. The oil companies make huge profits and it is lunacy to give them bailouts. The government bodies know they have strangled Oil, But they are unwilling to fix it. They also know they want to keep driving cars so they allow Oil Companies to continue. So they throw them a bone, once in a while, to keep them alive. It makes me wonder why these oil people do it.

  3. October 5, 2011 3:38

    All opinions. No facts presented.🙂

    • October 5, 2011 3:38

      Then present your own facts. What do you mean facts? What kind of facts are you talking about, moron? Did Neal Cruz present facts. What kind of facts did the anti-oil deregulation law present? Flawed, distorted facts, of course.

  4. Xoce Rixjal permalink
    October 6, 2011 3:38

    So you’re excusing your lack of facts by attacking your accuser? Demanding that he present his own facts? Denying any factual proof given as distorted and flawed? Calling him names? Why bother writing at all if all you do is spout polemics?

  5. Jack permalink
    January 26, 2012 3:38

    I think you are the one who is intellectually bankrupt. Your story of events resulting from Ramos not passing the ODL needs major revision.

    • January 26, 2012 3:38

      What do you mean major revision? Kindly share what you know about this issue.

  6. kirZIA. permalink
    March 12, 2012 3:38

    I respect your opinion but do please avoid HARSH WORDS in responding to the commentator of your post. God Bless.

    • March 12, 2012 3:38

      In this age of mediocrity, sometimes we have to be very harsh in pointing out the truth.

  7. jayson gasapo permalink
    March 21, 2012 3:38

    good points, balanced reasons from both sides, well said sa economic side. baliktarin mo man ang deregulation at anti-deregulation law, ganun padin ang mangyayari, pero ang iniisip ko lang kung ang mga involved dito ay ang mga oil companies, world trade oil, foriegn and domestic investors at gobyerno. why is this happening? you mean walang lusot ang pagunlad ng ating bansa? gusto ko lang malaman kung sino ang nasa likod nitong mga issue na ito. kasi imposible na walang cure sa problema natin, i mean ung cure na magkakaroon ng buying power ang mga tao sa market, meron naman siya ngaun, pero wala ng equilibrium. sino ang nasa likod ng issue na ito. baka naman kung sino din ang may-ari ng oil companies sila din ang nasa gobyerno kung sino ang mga investors sila din ang nasa gobyerno, kung sino din ang nasa private sectors sila din ang nasa gobyerno, sila mismo ang ngbebenefit. i hope

Trackbacks

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