RA 8479 — Downstream Oil Industry Deregulation Act of 1998

Signed: February 10, 1998 Effective: February 10, 1998 (upon publication)

RA 8479 deregulates the downstream oil industry — removing price controls, liberalizing market entry, and abolishing the Oil Price Stabilization Fund (OPSF) regime. It is the statutory basis for the Philippines’ current free-market downstream oil sector. The law executes the deregulation mandate embedded in RA 7638 §5(e) and is a precursor to EPIRA (RA 9136, 2001) in the broader energy sector deregulation sequence.

Chapter I — General Provisions (§1–4)

Declaration of Policy (§2)

Liberalize and deregulate the downstream oil industry to ensure a truly competitive market under a regime of fair prices, adequate and continuous supply of environmentally-clean and high-quality petroleum products. The State shall promote and encourage entry of new participants and introduce adequate measures to attain these goals. [RA 8479, §2, 1998]

Coverage (§3)

All persons or entities engaged in any activity of the domestic downstream oil industry, and persons or companies directly importing refined petroleum products for their own use. [RA 8479, §3, 1998]

Downstream Oil Industry (§4(h)): Importing, exporting, re-exporting, shipping, transporting, processing, refining, storing, distributing, marketing and/or selling crude oil, gasoline, diesel, LPG, kerosene, and other petroleum products.

Chapter II — Liberalization (§5–10)

Full Market Entry Liberalization (§5)

Any person or entity may [RA 8479, §5, 1998]:

• Import or purchase any quantity of crude oil and petroleum products from any source (foreign or domestic)
• Lease or own and operate refineries and other downstream oil facilities
• Market crude oil and petroleum products under a generic name or own trade name
• Use petroleum products for their own requirements

Requirements:

• Prior notice to DOE for monitoring purposes (replaces certificates of quality/health/safety/environmental clearance)
• Report every importation/exportation to DOE
• All oil importations must comply with the Basel Convention on hazardous waste

Tariff Treatment (§6)

A single and uniform 3% tariff duty on both imported crude oil and imported refined petroleum products — regardless of type. This replaced the differentiated tariff structure. The President may reduce this rate. The rate automatically adjusts to WTO/AFTA-compliant levels from January 1, 2004. [RA 8479, §6, 1998]

NPC exemption preserved (§6(b)): For as long as NPC enjoys exemptions from taxes and duties on petroleum products used for power generation, that exemption applies to purchases through local refineries and importation of fuel oil and diesel.

Fair Trade Promotion (§7)

DTI and DOE shall take measures to prevent cartelization, monopolies, and combinations in restraint of trade. DOE shall monitor oil company relationships with dealers, haulers, and LPG distributors to ensure fair and equitable practices and contract enforcement. DOE conciliates and arbitrates disputes over dealer mark-ups, freight rates, and LPG distributor margins. [RA 8479, §7, 1998]

BOI Incentives for New Investments (§9)

Persons with new investments (post-January 1, 1994) registered with BOI in refining, storage, marketing, and distribution shall receive BOI incentives for 5 years from registration, including [RA 8479, §9, 1998]:

• Income tax holiday
• Additional deduction for labor expenses
• 3% minimum duty and VAT on imported capital equipment
• Tax credit on domestic capital equipment
• Exemption from contractor’s tax
• Exemption from real property tax on production equipment
• Exemption from taxes/duties on imported spare parts

Note: Only new industry participants (not incumbents) qualify for storage/marketing/distribution incentives.

Retail Competition and Gasoline Station Fund (§10)

DOE promotes retail competition via training and networking. A PhP 300 million Gasoline Station Training and Loan Fund is established (sourced from PAGCOR) for medium- to long-term low-interest loans to persons completing the DOE-TESDA gasoline station training program. Breakdown: 94% lending; 2% training program; 1% admin; 3% per §26. [RA 8479, §10, 1998]

Chapter III — Anti-Trust Safeguards (§11–13)

Prohibited Acts (§11)

Two categories of anti-competitive conduct are expressly prohibited [RA 8479, §11, 1998]:

Exception: Pricing below average variable cost to match a competitor’s lower price (not to destroy competition) is not predatory pricing. [RA 8479, §11, 1998]

Other Prohibited Acts (§12)

Refusal to comply with the following is prohibited [RA 8479, §12, 1998]:

• Submission of reportorial requirements
• Use of clean and safe (environment and worker-benign) technologies
• DOE Secretary’s enforcement orders under §15
• Registration of fuel additives with DOE before use

Penalty: 2 years imprisonment + PhP 250,000–500,000 fine.

DOE-DOJ Joint Task Force (§13–14(d))

A DOE-DOJ Joint Task Force is mandated to receive and investigate reports of unreasonable price rises, determine merits within 30 days, and initiate necessary legal actions. DOJ may file complaints motu proprio. [RA 8479, §13–14, 1998]

Chapter IV — DOE Powers and Monitoring (§14–15)

DOE Monitoring Functions (§14)

[RA 8479, §14, 1998]

DOE Secretary Powers (§15)

• Gather information and investigate organization, business, conduct, and management of industry participants
• Require annual or special reports and written answers to questions
• Investigate alleged violations upon direction of President or Congress
• Recommend suspension or revocation of business permits for offenders
• Exercise powers under RA 7638 §5(c) for continuous, adequate, economic energy supply

Chapters V–VI — Transition and Full Deregulation (§16–20)

Two-Phase Deregulation (§16–19)

Phase I (Transition Phase): Automatic Oil Pricing Mechanism (APM) based on Singapore Import Parity (SIP) replaces discretionary price-setting. ERB sets Wholesale Posted Price (WPP) based on approved formula. Buffer fund of PhP 2.9 billion (Reserve Control Account) available for price stabilization. [RA 8479, §17–18, 1998]

Phase II (Full Deregulation): Commenced 5 months after effectivity (~July 1998). Upon full deregulation: [RA 8479, §19, 1998]

• All price controls removed
• Repealed: RA 6173 (as amended), EO 172 §5, LOI 1431, LOI 1441, LOI 1460, PD 1889, PD 1956

Exception for socially-sensitive products: LPG, regular gasoline, and kerosene remained under the APM for the full 5-month Transition Phase.

Piped Gas Pricing (§20)

ERB (Energy Regulatory Board) retains jurisdiction to fix and regulate rates of piped gas distributed by duly franchised gas companies through underground pipe systems — even after full deregulation. [RA 8479, §20, 1998]

Historical note: ERB was later abolished by EPIRA (RA 9136, 2001) and replaced by ERC. ERC assumed piped gas price regulation.

Final Provisions (§21–29)

OPSF Settlement (§21)

All outstanding OPSF (Oil Price Stabilization Fund) claims as of effectivity are treated as national government accounts payable. Reimbursement certificates issued by DOE may be used to pay up to 10% per payment of tariff duties and specific taxes until claims are settled. Certificates are non-transferable. [RA 8479, §21, 1998]

IPO Requirement for Refineries (§22)

Oil refinery operators must make a public offering of at least 10% of common stock within 3 years of effectivity or commencement of operations. No single person may own more than 5% of the offering. No cross-ownership between refiners in the IPO. [RA 8479, §22, 1998]

Penalties (§24)

General violations: 3 months to 1 year imprisonment + PhP 50,000–300,000 fine. (Distinct from anti-trust penalties in §11.) [RA 8479, §24, 1998]

Full text: Cleaned copy