THE Energy Department has asked the oil players to explain unusual price reductions in gasoline products in Mindanao which could breach provisions in the law.
The department said in a statement the price adjustment of oil companies in Mindanao from Aug. 30 to Sept. 6 alone was a huge P3 rollback, based on the monitoring of the DOE-Mindanao Field Office (MFO).
“While price rollbacks like this are a welcome development for the consumers, the DOE cautioned that sudden and sustained huge decreases in oil prices might qualify as “anti-competitive behavior” under the Oil Deregulation Law,” the agency said.
The Oil Deregulation Law of 1998 or Republic Act 8479 states that aside from caramelization —which means any agreement, combination or concerted action by refiners, importers and/or dealers, or their representatives, to fix prices, restrict outputs or divide markets, either by products or by areas, or allocate markets—predatory pricing is also prohibited.
Predatory pricing means selling or offering to sell any oil product at a price below the seller’s or offeror’s average variable cost for the purpose of destroying competition, eliminating a competitor or discouraging a potential competitor from entering the market, “provided, however, that pricing below average variable cost to match the lower price of the competitor and not for the purpose of destroying competition shall not be deemed predatory pricing.”
The law states any person found violating the provision will have to pay a fine ranging from P1 to P2 million and three- to seven-year imprisonment.
“This market behavior puts both smaller oil players and consumers at a disadvantageous position in the long run. Smaller oil players may actually lose its (sic) market share and end up closing, thus remaining oil players may have the chance to dictate prices to the detriment of the consuming public,” DOE said.
The department said relative issues brought about by this market behavior are peddling of petroleum products using the “bote-bote” scheme and alleged smuggling of oil products from nearby countries.
“Currently, the DOE-MFO has been coordinating with local government units [LGUs] concerned and the Bureau of Fire to eliminate the ‘bote-bote’ and while also discouraging consumers from patronizing such activity as this may endanger public safety and health,” it said.
The department is also in talks with the Customs Bureau regarding alleged smuggling of oil products as this may hurt not only the oil industry players, but also the economy of local government units in Mindanao and around the country for lost taxes affecting the delivery of basic services to our people.
“Moreover, the DOE is closely coordinating with the Department of Justice for the possible convening of the DOE-DOJ Task Force as necessary to look at any violations of the law,” it said.
The department has given assurances of its continuous vigilance to protect the welfare of the energy consumers.