Rethinking the Oil Deregulation Law

Rethinking the Oil Deregulation Law | Daily Tribune

Deregulation, by design, limits the role of government in the oil industry. Private firms determine sourcing, pricing, and inventory levels based on commercial considerations. In stable conditions, this model works. It encourages efficiency, fosters competition, and ensures supply without direct state intervention.

But geopolitical crises change the equation.

In periods of conflict, oil ceases to be just another commodity. It becomes a strategic resource — one that powers economies, sustains military readiness, and underpins national stability. Leaving procurement, allocation, and pricing entirely to market forces, without parallel state capability, exposes the country to risks it cannot control.

This is where the argument for recalibrating — if not partially repealing — the Oil Deregulation Law gains urgency. Government must not only regulate; it must be able to participate, intervene, and, when necessary, compete.

One reason is straightforward: sovereign-to-sovereign transactions can secure more favorable terms. Government-to-government oil deals often provide preferential pricing, stable supply commitments, and insulation from spot market volatility — advantages typically unavailable to private importers.

Moreover, the Philippines is not without leverage. Its strategic alignment with the United States, through the reinforced EDCA sites, provides a basis for negotiating minimum supply guarantees. In an era shaped by geopolitical blocs, energy access is increasingly tied to security partnerships.

Should such arrangements prove insufficient, the government must also be prepared to act pragmatically. Countries such as China and India have demonstrated flexibility in sourcing discounted oil — including from Russia — despite sanctions and financial constraints. They have developed alternative payment mechanisms, bypassing traditional systems like SWIFT, to secure supply at a lower cost.

The global oil market has already adapted. Russian crude continues to flow, often rerouted through intermediaries or refined in third countries before entering the global market. Even in Asia, supply chains have quietly adjusted, reflecting a system that is fragmenting but still functioning.

At the same time, the broader supply outlook is deteriorating. The Philippines imports most of its refined petroleum products from China, South Korea, Singapore, Thailand, and Japan. Yet many of these suppliers are themselves exposed to the same geopolitical chokepoints, particularly the Strait of Hormuz.

Japan and South Korea source a significant portion of their oil through this corridor, while Singapore and Thailand rely on it for substantial volumes. Any disruption will cascade across Asia’s refining and export networks.

There are already warning signs. China has considered restricting exports of refined petroleum products to secure its domestic supply. South Korea and Singapore are likewise evaluating export controls. These are not extraordinary measures; they are rational responses in times of uncertainty.

Other countries had moved earlier. Kazakhstan imposed export restrictions, while Russia and China prioritized domestic needs over exports of critical fuels such as jet fuel. If tensions escalate, such policies will likely intensify, tightening global availability.

For the Philippines, the implications are immediate. A disruption in refined product imports — particularly diesel and jet fuel — would severely impact transport, logistics, and national defense.

This is why the role of government must extend beyond policy into operational readiness.

Strategic stockpiling becomes essential — not only of finished products, but of crude oil. In a worst-case scenario, the state must have the authority and capability to direct domestic refining assets to prioritize critical outputs. Local facilities, including those operated by Petron, could be tasked under emergency conditions to produce essential fuels such as jet fuel for civilian and military use.

Such measures are not without precedent. In times of war or severe disruption, governments routinely exercise extraordinary powers to secure energy supply.

Even if current conflicts de-escalate, their effects will linger. Damage to infrastructure, production cuts, and heightened geopolitical risks will continue to shape markets long after hostilities end. Supply chains, once disrupted, do not revert quickly.

The Philippines has seen this before. The Covid-19 pandemic showed how systems can unravel under stress. But unlike a health crisis, there is no rapid remedy for an energy shock. Once supply tightens and inventories fall, recovery becomes far more difficult.

Energy security, therefore, can no longer be treated as a passive outcome of market dynamics. It must be actively managed as a core function of the state. This requires infrastructure — such as storage and ports — but also policy flexibility, strategic partnerships, and the willingness of government to step into the market when the national interest demands it.

The question is no longer whether deregulation has delivered benefits — it has. The question is whether it is sufficient in a world defined by disruption, conflict, and strategic competition.

On that question, the answer is increasingly clear: in times of peace, markets may be enough. In times of crisis, they are not.