Marcos takes heat over ‘cartelized’ oil pricing

President Ferdinand Marcos Jr. on Thursday faced mounting pressure to take over the operations of local oil companies amid accusations of “cartelized” pump pricing, with fuel costs breaching P100 per liter in a deepening energy crisis.

The pressure comes as the government moved to override market pricing in the power sector, with the Energy Regulatory Commission (ERC) suspending the Wholesale Electricity Spot Market (WESM) and replacing it with a state-administered pricing mechanism under Executive Order (EO) 110.

Marcos issued EO 110 last Tuesday, declaring a state of national energy emergency arising from the oil crisis spawned by the Middle East conflict between the United States and Israel against Iran, leading to the latter’s closure of the Strait of Hormuz.

The ERC halt, which takes effect today, 27 March, removes the spot market’s role in setting real-time electricity prices, effectively shifting pricing control from competitive bidding to administered rates during the crisis.

“In times of global energy disruption, our priority is clear — to protect Filipino consumers while ensuring that our power supply remains stable and reliable,” ERC chairperson Francis Saturnino Juan said.

“The temporary suspension of the WESM and the implementation of a modified administered pricing mechanism are necessary measures to cushion the impact of volatile fuel prices and safeguard the integrity of our power system,” he added.

In place of the WESM, the ERC will implement a Modified Administered Pricing mechanism, now under consultation and targeted for finalization by 1 April.

Price volatility

The regulator said prevailing market benchmarks no longer reflect current conditions that are marked by the geopolitical tensions and a constrained fuel supply, prompting a shift to technology-specific pricing.

Coal plants may be paid at fixed rates, natural gas plants based on contracted prices, while renewable energy sources such as hydro and geothermal will be placed under administered pricing with preferential dispatch.

Oil-based plants will also be compensated under administered prices when dispatched or contracted, the regulator explained.

The ERC said the overhaul aims to contain extreme price volatility, though it may limit price discovery and mask real-time supply pressures.

The agency’s intervention has sharpened calls for similar action in the oil sector, where prices remain largely market-driven under deregulation.

Trade Union Congress of the Philippines Partylist Representative Raymond Democrito Mendoza urged the President to activate his takeover powers following his declaration of a national energy emergency.

Mendoza stressed that decisive action is needed to shield consumers and workers from rising inflation.

Corruption concerns

Economist Alex Escucha backed the takeover option, but only “within proper controls and limits.”

“We do not want an overreaction like what happened during the pandemic,” he said, warning that the government lacks “any institutional capacity to take over and operate private oil companies.”

“It will just become an opportunity for rent seeking and corruption, especially in rationing scenarios,” he added.

Despite the intensifying calls, Malacañang said the President is not inclined to pursue a takeover.

“We don’t want to get into that discussion,” Marcos said when asked about the proposal.

Meanwhile, the Makabayan bloc in the House of Representatives has filed two bills seeking to classify petroleum products as prime commodities and to repeal deregulation.

House Bill 8765 seeks to amend the Price Act of 1992 to include oil products as essential goods, allowing the government to impose price caps during emergencies.

Under Republic Act 7581, prime commodities are protected from price manipulation, including hoarding, profiteering, and cartel behavior that trigger artificial price spikes.

“This protection is necessary to stop the blatant overpricing and to halt the domino effect of the fuel hikes on transportation fares and other products,” the bloc said in Filipino in its statement.

President Marcos, either under EO 110 or the earlier Executive Order 839 issued during the Arroyo administration, has the authority to clamp down on oil pricing excesses through the Department of Energy.

No less than a Supreme Court ruling in 2023 affirmed such powers available to Marcos unless, as his critics averred, he’s “not inclined to use them, being under the thumb of the oil companies acting as a veritable cartel.”

Oil companies have been accused of selling old stocks bought before the Gulf crisis at jacked-up prices to pad their profits. The same companies had been accused of being too slow to lower pump prices when global prices went down.

Clipped powers

Under Republic Act 8479, or the Oil Industry Deregulation Act of 1998, the government is granted limited emergency powers, including the ability to take over or direct oil company operations under specific conditions.

Ironically, the same law also strips the government of a direct hand in moderating fuel prices, removing its authority to impose price ceilings even during periods of extreme volatility.

It dismantled a key policy lever that had previously allowed the State to cushion consumers from sudden price shocks.

It also abolished a standby oil price stabilization fund established during the presidency of Ferdinand Marcos Sr., which was designed to subsidize fuel costs during supply disruptions such as the global oil crisis of the early 1970s.

Without both pricing controls and the buffer fund, the government’s role has been reduced largely to monitoring and coordination, leaving pump prices to be dictated by the oil companies — even in times of crisis.

These emergency powers were later defined under Executive Order 839 issued during the Arroyo administration to address supply concerns and upheld by the Supreme Court after being challenged by oil firms.

CA reversed

A full-scale state takeover, however, was sidestepped under EO 110, which stopped short of invoking stronger intervention powers — opting instead for coordinated management, conservation, procurement, and support measures.

The SC, in an en banc ruling penned by Associate Justice Marvic M.V.F. Leonen, promulgated in early 2023 and published in March 2024, upheld the DoE’s authority to exercise takeover powers.

The High Court reversed a 2013 Court of Appeals ruling that struck down Section 14(e) of the Arroyo EO, declaring the provision a valid delegation of emergency powers consistent with the doctrine of qualified political agency.

Under the doctrine, executive officials act as extensions of the President, with the DoE authorized to implement takeover measures once a national emergency is declared.

The DoE said it would implement the provision properly “if the need arises, while respecting the limits of the law.”