House Legislative Energy Action Development (LEAD) Council presiding officer Marikina City 2nd district Rep. Miro Quimbo couldn't help but conclude based on an economic manager's statements that there was indeed an oil cartel operating in the country.

During the first LEAD Council hearing Wednesday, April 8, Quimbo asked Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio Balisacan what he thought about the weekly fuel price adjustments being imposed by local oil companies.

The hearing was organized to help legislators come up with a response to economic burden casued by the Middle East conflict-triggered fuel price crisis, which as if this week led to five consecutive weeks of hefty fuel price hikes.

"Secretary, what is your opinion on this every Tuesday adjustment that the DOE (Department of Energy) actually mandates? Do you think it prevents or does it actually engender the elimination of competition?" Quimbo asked.

Balisacan's answer was rather straightforward: "In Econ[omics] 101, Mr. Chair, markets--when there are very few players in the markets--and you ask these players--government, maybe--asking them to cooperate, to coordinate, per actually asking a mono[poly]--a cartel. "

Quimbo stayed silent for a second after hearing this, but seemingly knew he came across a eureka moment. "Secretary, can you repeat that, just for the benefit of everyone," he said.

The local oil industry operates under a deregulated regime under the Oil Deregulation Law of 1998. It is a much-panned law, since it never fulfilled its promise of cheap fuel by way of intense competition among oil companies.

The reason for this as per the law's critics is that there really isn't a thriving competition among oil firms in the country--only a cartel, where big players call the shots.

Baliscan gave a lengthier retread of what what originally a simple answer, as well as a disclaimer. "I haven't looked closely at the practice of DOE, Mr. Chair, but what we do know is that the industry is a highly concentrated industry, there are only few players."

"In Economics 101, you know that it's easier to coordinate when there are only very few big players. Even if there are too many players, but there are only a few who really control, or [have] a dominant share of the market, coordination is much easier," he said.

"And if you have a situation where--OK, in situations like that, there are opportunities for cartel-like behavior, just like what they have in OPEC (Organization of the Petroleum Exporting Countries),lright? But as you do know in OPEC, it's easy for any country to go away from the norm, because one...who gets away from the norm will make easy money. But that cartel can be stable if there is an enforcer, if there is a policeman," Balisacan noted.

"In some cases...in our system, if in government, for example you are asking the players in a market to come to a room, agree on a price, what do you have? That's what--how they do in a cartel," said the DEPDev chief.

To this, Quimbo, an economist, said: "This is a matter that's long been debated on. The intention is good on the part of the [DOE], they want people to declare given a specific formula, proprietary, they don't really go into it."

"But the purpose is good, but I think the effect is we are, in effect, promoting a cartelization and it is government itself--gobyerno mismo ang nagbibigay ng presyo at nagke-create ng environment para mag-collude itong mga oil companies. Kaya hindi nagkakahiwa-hiwalay ang mga presyo," Quimbo said.

(It is the government itself that sets the prices and creates the environment for these oil companies to collude. That is why the prices do not diverge.)

"That in my mind needs to be reexamined," stressed the presiding officer of the 13-committee energy crisis council.

As if realizing the weight of his remarks in front of other executive officials who participated in the whole-day hearing, Balisacan interjected and clarified that he technically didn't say that there was an oil cartel.

"Mr. Chair, I'm not saying that there is a cartel. But I think that our regulatory agencies, in particular PCC (Philippine Competition Commission) and ERC (Energy Regulatory Commission) should work together to investigate," he said.

Quimbo did not directly respond to Balisacan's clarification.

At any rate, the Marikina lawmaker said the LEAD Council will hold three more hearings next week, before breaking up into smaller clusters in the bid to craft a detailed response measure.