FEF backs effort of the Department of Energy to resist calls for oil price controls

FOUNDATION FOR ECONOMIC FREEDOM’S STATEMENT OF SUPPORT TO THE DEPARTMENT OF ENERGY

WE, the Foundation for Economic Freedom, stand by the principle that markets that work efficiently serve the best interest of consumers. We disagree with the populist  view that firms should sell products at historical acquisition cost as this is contrary to best practices. Enterprises will buy, trade, and sell at replacement cost; insisting otherwise can lead to supply shortage which will imperil not only our oil but energy security.

WE fully recognize and support the laudable efforts of the Department of Energy and its initiatives to:

• Vigilantly monitor oil price movements both in the international and local markets
• Provide greater transparency in the computation of local petroleum product prices using alternative formulas and posting them at the DOE website for easy online access
• Require oil companies to explain when their price adjustments are higher than the DOE computation to prevent anti-competitive behavior
• Conduct dialogues  with consumer and transport groups for a more open discussion of the oil price movements and other concerns
• Conduct public consultations in the course of spot inspections of gasoline stations to monitor prices

WE also earnestly support the DOE’s leadership in promoting alternative fuels and energy efficiency in its thrust to ensure energy security and sustainability.

WE therefore encourage other energy stakeholders to be guided by the tenets of the Oil Deregulation Law in fostering a truly competitive market, stimulating private investments, freeing up the government and taxpayers of costly oil subsidies, and providing better services to consumers.

WE commend government's temporary use of targeted subsidies in favor of vulnerable groups. Broad stroke populist measures being pushed  like special exemption of all oil products from VAT, re-establishment of the oil price stabilization fund, or worse,  price controls ,  will surely lead to price distortions, misallocation and inefficiencies in the use of an expensive resource,  fiscal wastes due to subsidization of those who do not need help, and  supply shortages.