Bringing back the Oil Price Stabilization Fund (OPSF) is not the solution to the problem of rising global fuel prices and will only benefit the rich , according to the Philippine Institute for Development Studies (PIDS).
Under the OPSF, the government can intervene and set fuel prices that are stable or fixed for a certain period to subsidize real-time adjustments in prices.
While the Downstream Oil Industry Deregulation Act of 1998 eventually scrapped the OPSF, the incoming administration has floated the idea reviving the fund.
According to the PIDS study, it is usually the rich who consume a higher volume of petroleum, making the subsidy from OPSF to “disproportionately benefit the rich more than the poor.”
“Reviving the OPSF will likely result in the national government having to bail out the special fund using the general fund, displacing funding for anti-poverty programs in the process… As there are many players now in the downstream oil industry, administering the OPSF will be very costly and the huge cost will be disproportionately borne by the poor,” said the study by Dr. Adoracion Navarro, PIDS senior fellow and former undersecretary of the National Economic and Development Authority.
Instead of the OPSF revival, Navarro said in the study the government can implement effective targeted subsidy program for those most affected by fuel price increases.
She cited the government’s current Pantawid Pasada Program but mentioned that improvements in timing, coordination and efficiency in distribution as well as the generousness of the amounts should be reconsidered in order for the public to benefit more.
The PIDS study also said demand management programs such as energy conservation activities and energy efficiency programs can help mitigate the impacts of oil price peaks, especially with the passing of the Energy Efficiency and Conservation Act of 2019.
Navarro noted the need to push for supply-side interventions such as the diversification of energy supply sources and development of indigenous energy resources to reduce the country’s reliance on imported oil over the medium to long term.
The study also mentioned that current alternative policies being considered by the government besides reviving the OPSF include adjustments on the minimum inventory requirement for fuel retailers and unbundling of retail prices to encourage transparency in the sector.
However, the unbundling of rates is currently facing legal issues as players appealed to the courts that such move will become contrary to the oil deregulation law and reveal crucial trade secrets to competitors.
The PIDS study also said that OPSF’s revival may mean the return of previous issues such as mismatches between payments to the fund and claims against it as well as the lack of discipline by policymakers in sticking to the price stabilization purpose of the fund, among others.
