Competition Policy in the Philippine Downstream Oil Industry

The Philippine downstream petroleum industry underwent monumental change with the passage of RA 8180, the original Downstream Oil Industry Deregulation Act. This paper surveys the industry developments before and after deregulation and analyzes the consistency of the Supreme Court decision with economic theory. The report argues that tariff differentials are currently built into the country’s tariff code as a matter of policy, even in the context of the tariff reform programs. The paper uses a theoretical model (a simple extension of the Bertrand price fixing game) that shows that similar prices and timing of prices changes can be consistent with competition. Moreover, the model predicts an asymmetry in the timing of price changes. It also looks at the proposed national oil exchange and examines the experience of other countries’ regulation of the downstream petroleum industry.