G.R. No.

124360 November 5, 1997

FRANCISCO S. TATAD, petitioner,
vs.
THE SECRETARY OF THE DEPARTMENT OF ENERGY AND THE SECRETARY
OF THE DEPARTMENT OF FINANCE, respondents.
G.R. No. 127867 November 5, 1997
EDCEL C. LAGMAN, JOKER P. ARROYO, ENRIQUE GARCIA, WIGBERTO
TANADA, FLAG HUMAN RIGHTS FOUNDATION, INC., FREEDOM FROM
DEBT COALITION (FDC), SANLAKAS, petitioners,
vs.
HON. RUBEN TORRES in his capacity as the Executive Secretary, HON.
FRANCISCO VIRAY, in his capacity as the Secretary of Energy, CALTEX
Philippines, Inc., PETRON Corporation and PILIPINAS SHELL
Corporation, respondents.

PUNO, J.:
The petitions at bar challenge the constitutionality of Republic Act No.
8180 entitled "An Act Deregulating the Downstream Oil Industry and For
Other Purposes". 1 R.A. No. 8180 ends twenty six (26) years of
government regulation of the downstream oil industry. Few cases carry a
surpassing importance on the life of every Filipino as these petitions for
the upswing and downswing of our economy materially depend on the
oscillation of oil.
First, the facts without the fat. Prior to 1971, there was no government
agency regulating the oil industry other than those dealing with ordinary
commodities. Oil companies were free to enter and exit the market
without any government interference. There were four (4) refining
companies (Shell, Caltex, Bataan Refining Company and Filoil Refining)
and six (6) petroleum marketing companies (Esso, Filoil, Caltex, Getty,
Mobil and Shell), then operating in the country. 2
In 1971, the country was driven to its knees by a crippling oil crisis. The
government, realizing that petroleum and its products are vital to
national security and that their continued supply at reasonable prices is
essential to the general welfare, enacted the Oil Industry Commission

Act. 3 It created the Oil Industry Commission (OIC) to regulate the

business of importing, exporting, re-exporting, shipping, transporting,
processing, refining, storing, distributing, marketing and selling crude oil,
gasoline, kerosene, gas and other refined petroleum products. The OIC
was vested with the power to fix the market prices of petroleum
products, to regulate the capacities of refineries, to license new refineries
and to regulate the operations and trade practices of the industry. 4
In addition to the creation of the OIC, the government saw the imperious
need for a more active role of Filipinos in the oil industry. Until the early
seventies, the downstream oil industry was controlled by multinational
companies. All the oil refineries and marketing companies were owned
by foreigners whose economic interests did not always coincide with the
interest of the Filipino. Crude oil was transported to the country by
foreign-controlled tankers. Crude processing was done locally by foreignowned refineries and petroleum products were marketed through
foreign-owned retail outlets. On November 9, 1973, President Ferdinand
E. Marcos boldly created the Philippine National Oil Corporation (PNOC)
to break the control by foreigners of our oil industry. 5 PNOC engaged in
the business of refining, marketing, shipping, transporting, and storing
petroleum. It acquired ownership of ESSO Philippines and Filoil to serve
as its marketing arm. It bought the controlling shares of Bataan Refining
Corporation, the largest refinery in the country. 6 PNOC later put up its
own marketing subsidiary Petrophil. PNOC operated under the
business name PETRON Corporation. For the first time, there was a
Filipino presence in the Philippine oil market.
In 1984, President Marcos through Section 8 of Presidential Decree No.
1956, created the Oil Price Stabilization Fund (OPSF) to cushion the
effects of frequent changes in the price of oil caused by exchange rate
adjustments or increase in the world market prices of crude oil and
imported petroleum products. The fund is used (1) to reimburse the oil
companies for cost increases in crude oil and imported petroleum
products resulting from exchange rate adjustment and/or increase in
world market prices of crude oil, and (2) to reimburse oil companies for
cost underrecovery incurred as a result of the reduction of domestic
prices of petroleum products. Under the law, the OPSF may be sourced
from:

1. any increase in the tax collection from ad valorem tax or customs duty
imposed on petroleum products subject to tax under P.D. No. 1956
arising from exchange rate adjustment,
2. any increase in the tax collection as a result of the lifting of tax
exemptions of government corporations, as may be determined by the
Minister of Finance in consultation with the Board of Energy,
3. any additional amount to be imposed on petroleum products to
augment the resources of the fund through an appropriate order that
may be issued by the Board of Energy requiring payment of persons or
companies engaged in the business of importing, manufacturing and/or
marketing petroleum products, or
4. any resulting peso costs differentials in case the actual peso costs paid
by oil companies in the importation of crude oil and petroleum products
is less than the peso costs computed using the reference foreign
exchange rate as fixed by the Board of Energy. 7
By 1985, only three (3) oil companies were operating in the country
Caltex, Shell and the government-owned PNOC.
In May, 1987, President Corazon C. Aquino signed Executive Order No.
172 creating the Energy Regulatory Boardto regulate the business of
importing, exporting, re-exporting, shipping, transporting, processing,
refining, marketing and distributing energy resources "when warranted
and only when public necessity requires." The Board had the following
powers and functions:
1. Fix and regulate the prices of petroleum products;
2. Fix and regulate the rate schedule or prices of piped gas to be charged
by duly franchised gas companies which distribute gas by means of
underground pipe system;
3. Fix and regulate the rates of pipeline concessionaries under the
provisions of R.A. No. 387, as amended . . . ;
4. Regulate the capacities of new refineries or additional capacities of
existing refineries and license refineries that may be organized after the
issuance of (E.O. No. 172) under such terms and conditions as are
consistent with the national interest; and

5. Whenever the Board has determined that there is a shortage of any

petroleum product, or when public interest so requires, it may take such
steps as it may consider necessary, including the temporary adjustment
of the levels of prices of petroleum products and the payment to the Oil
Price Stabilization Fund . . . by persons or entities engaged in the
petroleum industry of such amounts as may be determined by the Board,
which may enable the importer to recover its cost of importation. 8
On December 9, 1992, Congress enacted R.A. No. 7638 which created
the Department of Energy to prepare, integrate, coordinate, supervise
and control all plans, programs, projects, and activities of the
government in relation to energy exploration, development, utilization,
distribution and conservation. 9 The thrust of the Philippine energy
program under the law was toward privatization of government agencies
related to energy, deregulation of the power and energy industry and
reduction of dependency on oil-fired plants. 10 The law also aimed to
encourage free and active participation and investment by the private
sector in all energy activities. Section 5(e) of the law states that "at the
end of four (4) years from the effectivity of this Act, the Department
shall, upon approval of the President, institute the programs
and timetable of deregulation of appropriate energy projects and
activities of the energy industry."
Pursuant to the policies enunciated in R.A. No. 7638, the government
approved the privatization of Petron Corporation in 1993. On December
16, 1993, PNOC sold 40% of its equity in Petron Corporation to the
Aramco Overseas Company.
In March 1996, Congress took the audacious step of deregulating the
downstream oil industry. It enacted R.A. No.8180, entitled the
"Downstream Oil Industry Deregulation Act of 1996." Under the
deregulated environment, "any person or entity may import or purchase
any quantity of crude oil and petroleum products from a foreign or
domestic source, lease or own and operate refineries and other
downstream oil facilities and market such crude oil or use the same for
his own requirement," subject only to monitoring by the Department of
Energy. 11

The deregulation process has two phases: the transition phase and the
full deregulation phase. During the transition phase, controls of the nonpricing aspects of the oil industry were to be lifted. The following were to
be accomplished: (1) liberalization of oil importation, exportation,
manufacturing, marketing and distribution, (2) implementation of an
automatic pricing mechanism, (3) implementation of an automatic
formula to set margins of dealers and rates of haulers, water transport
operators and pipeline concessionaires, and (4) restructuring of oil taxes.
Upon full deregulation, controls on the price of oil and the foreign
exchange cover were to be lifted and the OPSF was to be abolished.
The first phase of deregulation commenced on August 12, 1996.
On February 8, 1997, the President implemented the full deregulation of
the Downstream Oil Industry through E.O.No. 372.
The petitions at bar assail the constitutionality of various provisions of
R.A No. 8180 and E.O. No. 372.
In G.R. No. 124360, petitioner Francisco S. Tatad seeks the annulment of
section 5(b) of R.A. No. 8180. Section 5(b) provides:
b) Any law to the contrary notwithstanding and starting with the
effectivity of this Act, tariff duty shall be imposed and collected on
imported crude oil at the rate of three percent (3%) and imported refined
petroleum products at the rate of seven percent (7%), except fuel oil and
LPG, the rate for which shall be the same as that for imported crude oil:
Provided, That beginning on January 1, 2004 the tariff rate on imported
crude oil and refined petroleum products shall be the same: Provided,
further, That this provision may be amended only by an Act of Congress.
The petition is anchored on three arguments:
First, that the imposition of different tariff rates on imported crude oil
and imported refined petroleum products violates the equal protection
clause. Petitioner contends that the 3%-7% tariff differential unduly
favors the three existing oil refineries and discriminates against
prospective investors in the downstream oil industry who do not have
their own refineries and will have to source refined petroleum products
from abroad.

Second, that the imposition of different tariff rates does not deregulate
the downstream oil industry but instead controls the oil industry,
contrary to the avowed policy of the law. Petitioner avers that the tariff
differential between imported crude oil and imported refined petroleum
products bars the entry of other players in the oil industry because it
effectively protects the interest of oil companies with existing refineries.
Thus, it runs counter to the objective of the law "to foster a truly
competitive market."
Third, that the inclusion of the tariff provision in section 5(b) of R.A. No.
8180 violates Section 26(1) Article VI of the Constitution requiring every
law to have only one subject which shall be expressed in its title.
Petitioner contends that the imposition of tariff rates in section 5(b) of
R.A. No. 8180 is foreign to the subject of the law which is the
deregulation of the downstream oil industry.
In G.R. No. 127867, petitioners Edcel C. Lagman, Joker P. Arroyo, Enrique
Garcia, Wigberto Tanada, Flag Human Rights Foundation, Inc., Freedom
from Debt Coalition (FDC) and Sanlakas contest the constitutionality of
section 15 of R.A. No. 8180 and E.O. No. 392. Section 15 provides:
Sec. 15. Implementation of Full Deregulation. Pursuant to Section 5(e)
of Republic Act No. 7638, the DOE shall, upon approval of the President,
implement the full deregulation of the downstream oil industry not later
than March 1997. As far as practicable, the DOE shall time the full
deregulation when the prices of crude oil and petroleum products in the
world market are declining and when the exchange rate of the peso in
relation to the US dollar is stable. Upon the implementation of the full
deregulation as provided herein, the transition phase is deemed
terminated and the following laws are deemed repealed:
xxx xxx xxx
E.O. No. 372 states in full, viz.:
WHEREAS, Republic Act No. 7638, otherwise known as the "Department
of Energy Act of 1992," provides that, at the end of four years from its
effectivity last December 1992, "the Department (of Energy) shall, upon
approval of the President, institute the programs and time table of

deregulation of appropriate energy projects and activities of the energy

sector;"
WHEREAS, Section 15 of Republic Act No. 8180, otherwise known as the
"Downstream Oil Industry Deregulation Act of 1996," provides that "the
DOE shall, upon approval of the President, implement full deregulation of
the downstream oil industry not later than March, 1997. As far as
practicable, the DOE shall time the full deregulation when the prices of
crude oil and petroleum products in the world market are declining and
when the exchange rate of the peso in relation to the US dollar is stable;"
WHEREAS, pursuant to the recommendation of the Department of
Energy, there is an imperative need to implement the full deregulation of
the downstream oil industry because of the following recent
developments: (i) depletion of the buffer fund on or about 7 February
1997 pursuant to the Energy Regulatory Board's Order dated 16 January
1997; (ii) the prices of crude oil had been stable at $21-$23 per barrel
since October 1996 while prices of petroleum products in the world
market had been stable since mid-December of last year. Moreover,
crude oil prices are beginning to soften for the last few days while prices
of some petroleum products had already declined; and (iii) the exchange
rate of the peso in relation to the US dollar has been stable for the past
twelve (12) months, averaging at around P26.20 to one US dollar;
WHEREAS, Executive Order No. 377 dated 31 October 1996 provides for
an institutional framework for the administration of the deregulated
industry by defining the functions and responsibilities of various
government agencies;
WHEREAS, pursuant to Republic Act No. 8180, the deregulation of the
industry will foster a truly competitive market which can better achieve
the social policy objectives of fair prices and adequate, continuous supply
of environmentally-clean and high quality petroleum products;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the
Philippines, by the powers vested in me by law, do hereby declare the full
deregulation of the downstream oil industry.
In assailing section 15 of R.A. No. 8180 and E.O. No. 392, petitioners offer
the following submissions:

First, section 15 of R.A. No. 8180 constitutes an undue delegation of

legislative power to the President and the Secretary of Energy because it
does not provide a determinate or determinable standard to guide the
Executive Branch in determining when to implement the full deregulation
of the downstream oil industry. Petitioners contend that the law does not
define when it is practicable for the Secretary of Energy to recommend to
the President the full deregulation of the downstream oil industry or
when the President may consider it practicable to declare full
deregulation. Also, the law does not provide any specific standard to
determine when the prices of crude oil in the world market are
considered to be declining nor when the exchange rate of the peso to the
US dollar is considered stable.
Second, petitioners aver that E.O. No. 392 implementing the full
deregulation of the downstream oil industry is arbitrary and
unreasonable because it was enacted due to the alleged depletion of the
OPSF fund a condition not found in R.A. No. 8180.
Third, section 15 of R.A. No. 8180 and E.O. No. 392 allow the formation of
a de facto cartel among the three existing oil companies Petron, Caltex
and Shell in violation of the constitutional prohibition against
monopolies, combinations in restraint of trade and unfair competition.
Respondents, on the other hand, fervently defend the constitutionality of
R.A. No. 8180 and E.O. No. 392. In addition, respondents contend that
the issues raised by the petitions are not justiciable as they pertain to the
wisdom of the law. Respondents further aver that petitioners have
no locus standi as they did not sustain nor will they sustain direct injury
as a result of the implementation of R.A. No. 8180.
The petitions were heard by the Court on September 30, 1997. On
October 7, 1997, the Court ordered the private respondents oil
companies "to maintain the status quo and to cease and desist from
increasing the prices of gasoline and other petroleum fuel products for a
period of thirty (30) days . . . subject to further orders as conditions may
warrant."
We shall now resolve the petitions on the merit. The petitions raise
procedural and substantive issues bearing on the constitutionality of R.A.
No. 8180 and E.O. No. 392. The procedural issues are: (1) whether or not

the petitions raise a justiciable controversy, and (2) whether or not the
petitioners have the standing to assail the validity of the subject law and
executive order. The substantive issues are: (1) whether or not section 5
(b) violates the one title one subject requirement of the Constitution;
(2) whether or not the same section violates the equal protection clause
of the Constitution; (3) whether or not section 15 violates the
constitutional prohibition on undue delegation of power; (4) whether or
not E.O. No. 392 is arbitrary and unreasonable; and (5) whether or not
R.A. No. 8180 violates the constitutional prohibition against monopolies,
combinations in restraint of trade and unfair competition.
We shall first tackle the procedural issues. Respondents claim that the
avalanche of arguments of the petitioners assail the wisdom of R.A. No.
8180. They aver that deregulation of the downstream oil industry is a
policy decision made by Congress and it cannot be reviewed, much less
be reversed by this Court. In constitutional parlance, respondents
contend that the petitions failed to raise a justiciable controversy.
Respondents' joint stance is unnoteworthy. Judicial power includes not
only the duty of the courts to settle actual controversies involving rights
which are legally demandable and enforceable, but also the duty to
determine whether or not there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the government. 12 The courts, as guardians of the
Constitution, have the inherent authority to determine whether a statute
enacted by the legislature transcends the limit imposed by the
fundamental law. Where a statute violates the Constitution, it is not only
the right but the duty of the judiciary to declare such act as
unconstitutional and void. 13 We held in the recent case of Tanada
v. Angara: 14
xxx xxx xxx
In seeking to nullify an act of the Philippine Senate on the ground that it
contravenes the Constitution, the petition no doubt raises a justiciable
controversy. Where an action of the legislative branch is seriously alleged
to have infringed the Constitution, it becomes not only the right but in
fact the duty of the judiciary to settle the dispute. The question thus
posed is judicial rather than political. The duty to adjudicate remains to

assure that the supremacy of the Constitution is upheld. Once a

controversy as to the application or interpretation of a constitutional
provision is raised before this Court, it becomes a legal issue which the
Court is bound by constitutional mandate to decide.
Even a sideglance at the petitions will reveal that petitioners have raised
constitutional issues which deserve the resolution of this Court in view of
their seriousness and their value as precedents. Our statement of facts
and definition of issues clearly show that petitioners are assailing R.A. No.
8180 because its provisions infringe the Constitution and not because the
law lacks wisdom. The principle of separation of power mandates that
challenges on the constitutionality of a law should be resolved in our
courts of justice while doubts on the wisdom of a law should be debated
in the halls of Congress. Every now and then, a law may be denounced in
court both as bereft of wisdom and constitutionally infirmed. Such
denunciation will not deny this Court of its jurisdiction to resolve the
constitutionality of the said law while prudentially refusing to pass on its
wisdom.
The effort of respondents to question the locus standi of petitioners must
also fall on barren ground. In language too lucid to be misunderstood,
this Court has brightlined its liberal stance on a petitioner's locus
standi where the petitioner is able to craft an issue of transcendental
significance to the people. 15 In Kapatiran ng mga Naglilingkod sa
Pamahalaan ng Pilipinas, Inc. v. Tan, 16 we stressed:
xxx xxx xxx
Objections to taxpayers' suit for lack of sufficient personality, standing or
interest are, however, in the main procedural matters. Considering the
importance to the public of the cases at bar, and in keeping with the
Court's duty, under the 1987 Constitution, to determine whether or not
the other branches of government have kept themselves within the limits
of the Constitution and the laws and that they have not abused the
discretion given to them, the Court has brushed aside technicalities of
procedure and has taken cognizance of these petitions.
There is not a dot of disagreement between the petitioners and the
respondents on the far reaching importance of the validity of RA No.
8180 deregulating our downstream oil industry. Thus, there is no good

sense in being hypertechnical on the standing of petitioners for they pose

issues which are significant to our people and which deserve our
forthright resolution.
We shall now track down the substantive issues. In G.R. No. 124360
where petitioner is Senator Tatad, it is contended that section 5(b) of R.A.
No. 8180 on tariff differential violates the provision 17 of the Constitution
requiring every law to have only one subject which should be expressed
in its title. We do not concur with this contention. As a policy, this Court
has adopted a liberal construction of the one title one subject rule. We
have consistently ruled 18 that the title need not mirror, fully index or
catalogue all contents and minute details of a law. A law having a single
general subject indicated in the title may contain any number of
provisions, no matter how diverse they may be, so long as they are not
inconsistent with or foreign to the general subject, and may be
considered in furtherance of such subject by providing for the method
and means of carrying out the general subject. 19 We hold that section
5(b) providing for tariff differential is germane to the subject of R.A. No.
8180 which is the deregulation of the downstream oil industry. The
section is supposed to sway prospective investors to put up refineries in
our country and make them rely less on imported petroleum. 20 We shall,
however, return to the validity of this provision when we examine its
blocking effect on new entrants to the oil market.
We shall now slide to the substantive issues in G.R. No. 127867.
Petitioners assail section 15 of R.A. No. 8180 which fixes the time frame
for the full deregulation of the downstream oil industry. We restate its
pertinent portion for emphasis, viz.:
Sec. 15. Implementation of Full Deregulation Pursuant to section 5(e)
of Republic Act No. 7638, the DOE shall, upon approval of the President,
implement the full deregulation of the downstream oil industry not later
than March 1997. As far as practicable, the DOE shall time the full
deregulation when the prices of crude oil and petroleum products in the
world market are declining and when the exchange rate of the peso in
relation to the US dollar is stable . . .
Petitioners urge that the phrases "as far as practicable," "decline of crude
oil prices in the world market" and "stability of the peso exchange rate to

the US dollar" are ambivalent, unclear and inconcrete in meaning. They

submit that they do not provide the "determinate or determinable
standards" which can guide the President in his decision to fully
deregulate the downstream oil industry. In addition, they contend that
E.O. No. 392 which advanced the date of full deregulation is void for it
illegally considered the depletion of the OPSF fund as a factor.
The power of Congress to delegate the execution of laws has long been
settled by this Court. As early as 1916 inCompania General de Tabacos de
Filipinas vs. The Board of Public Utility Commissioners, 21 this Court thru,
Mr. Justice Moreland, held that "the true distinction is between the
delegation of power to make the law, which necessarily involves a
discretion as to what it shall be, and conferring authority or discretion as
to its execution, to be exercised under and in pursuance of the law. The
first cannot be done; to the latter no valid objection can be made." Over
the years, as the legal engineering of men's relationship became more
difficult, Congress has to rely more on the practice of delegating the
execution of laws to the executive and other administrative agencies.
Two tests have been developed to determine whether the delegation of
the power to execute laws does not involve the abdication of the power
to make law itself. We delineated the metes and bounds of these tests
in Eastern Shipping Lines, Inc. VS. POEA, 22 thus:
There are two accepted tests to determine whether or not there is a valid
delegation of legislative power, viz: the completeness test and the
sufficient standard test. Under the first test, the law must be complete in
all its terms and conditions when it leaves the legislative such that when
it reaches the delegate the only thing he will have to do is to enforce it.
Under the sufficient standard test, there must be adequate guidelines or
limitations in the law to map out the boundaries of the delegate's
authority and prevent the delegation from running riot. Both tests are
intended to prevent a total transference of legislative authority to the
delegate, who is not allowed to step into the shoes of the legislature and
exercise a power essentially legislative.
The validity of delegating legislative power is now a quiet area in our
constitutional landscape. As sagely observed, delegation of legislative
power has become an inevitability in light of the increasing complexity of

the task of government. Thus, courts bend as far back as possible to

sustain the constitutionality of laws which are assailed as unduly
delegating legislative powers. Citing Hirabayashi v. United States 23 as
authority, Mr. Justice Isagani A. Cruz states "that even if the law does not
expressly pinpoint the standard, the courts will bend over backward to
locate the same elsewhere in order to spare the statute, if it can, from
constitutional infirmity." 24
Given the groove of the Court's rulings, the attempt of petitioners to
strike down section 15 on the ground of undue delegation of legislative
power cannot prosper. Section 15 can hurdle both the completeness test
and the sufficient standard test. It will be noted that Congress expressly
provided in R.A. No. 8180 that full deregulation will start at the end of
March 1997, regardless of the occurrence of any event. Full deregulation
at the end of March 1997 is mandatory and the Executive has no
discretion to postpone it for any purported reason. Thus, the law is
complete on the question of the final date of full deregulation. The
discretion given to the President is to advance the date of full
deregulation before the end of March 1997. Section 15 lays down the
standard to guide the judgment of the President he is to time it as
far as practicable when the prices of crude oil and petroleum products in
the world market are declining and when the exchange rate of the peso
in relation to the US dollar is stable.
Petitioners contend that the words "as far as practicable," "declining" and
"stable" should have been defined in R.A. No. 8180 as they do not set
determinate or determinable standards. The stubborn submission
deserves scant consideration. The dictionary meanings of these words
are well settled and cannot confuse men of reasonable intelligence.
Webster defines "practicable" as meaning possible to practice or
perform, "decline" as meaning to take a downward direction, and
"stable" as meaning firmly established. 25 The fear of petitioners that
these words will result in the exercise of executive discretion that will run
riot is thus groundless. To be sure, the Court has sustained the validity of
similar, if not more general standards in other cases. 26
It ought to follow that the argument that E.O. No. 392 is null and void as
it was based on indeterminate standards set by R.A. 8180 must likewise

fail. If that were all to the attack against the validity of E.O. No. 392, the
issue need not further detain our discourse. But petitioners further posit
the thesis that the Executive misapplied R.A. No. 8180 when it considered
the depletion of the OPSF fund as a factor in fully deregulating the
downstream oil industry in February 1997. A perusal of section 15 of R.A.
No. 8180 will readily reveal that it only enumerated two factors to be
considered by the Department of Energy and the Office of the
President, viz.: (1) the time when the prices of crude oil and petroleum
products in the world market are declining, and (2) the time when the
exchange rate of the peso in relation to the US dollar is stable. Section 15
did not mention the depletion of the OPSF fund as a factor to be given
weight by the Executive before ordering full deregulation. On the
contrary, the debates in Congress will show that some of our legislators
wanted to impose as a pre-condition to deregulation a showing that the
OPSF fund must not be in deficit. 27 We therefore hold that the Executive
department failed to follow faithfully the standards set by R.A. No. 8180
when it considered the extraneous factor of depletion of the OPSF fund.
The misappreciation of this extra factor cannot be justified on the ground
that the Executive department considered anyway the stability of the
prices of crude oil in the world market and the stability of the exchange
rate of the peso to the dollar. By considering another factor to hasten full
deregulation, the Executive department rewrote the standards set forth
in R.A. 8180. The Executive is bereft of any right to alter either by
subtraction or addition the standards set in R.A. No. 8180 for it has no
power to make laws. To cede to the Executive the power to make law is
to invite tyranny, indeed, to transgress the principle of separation of
powers. The exercise of delegated power is given a strict scrutiny by
courts for the delegate is a mere agent whose action cannot infringe the
terms of agency. In the cases at bar, the Executive co-mingled the factor
of depletion of the OPSF fund with the factors of decline of the price of
crude oil in the world market and the stability of the peso to the US
dollar. On the basis of the text of E.O. No. 392, it is impossible to
determine the weight given by the Executive department to the
depletion of the OPSF fund. It could well be the principal consideration
for the early deregulation. It could have been accorded an equal
significance. Or its importance could be nil. In light of this uncertainty, we

rule that the early deregulation under E.O. No. 392 constitutes a
misapplication of R.A. No. 8180.
We now come to grips with the contention that some provisions of R.A.
No. 8180 violate section 19 of Article XII of the 1987 Constitution. These
provisions are:
(1) Section 5 (b) which states "Any law to the contrary notwithstanding
and starting with the effectivity of this Act, tariff duty shall be imposed
and collected on imported crude oil at the rate of three percent (3%) and
imported refined petroleum products at the rate of seven percent (7%)
except fuel oil and LPG, the rate for which shall be the same as that for
imported crude oil. Provided, that beginning on January 1, 2004 the tariff
rate on imported crude oil and refined petroleum products shall be the
same. Provided, further, that this provision may be amended only by an
Act of Congress."
(2) Section 6 which states "To ensure the security and continuity of
petroleum crude and products supply, the DOE shall require the refiners
and importers to maintain a minimum inventory equivalent to ten
percent (10%) of their respective annual sales volume or forty (40) days
of supply, whichever is lower," and
(3) Section 9 (b) which states "To ensure fair competition and prevent
cartels and monopolies in the downstream oil industry, the following acts
shall be prohibited:
xxx xxx xxx
(b) Predatory pricing which means selling or offering to sell any product
at a price unreasonably below the industry average cost so as to attract
customers to the detriment of competitors.
On the other hand, section 19 of Article XII of the Constitution allegedly
violated by the aforestated provisions of R.A. No. 8180 mandates: "The
State shall regulate or prohibit monopolies when the public interest so
requires. No combinations in restraint of trade or unfair competition shall
be allowed."
A monopoly is a privilege or peculiar advantage vested in one or more
persons or companies, consisting in the exclusive right or power to carry
on a particular business or trade, manufacture a particular article, or

control the sale or the whole supply of a particular commodity. It is a

form of market structure in which one or only a few firms dominate the
total sales of a product or service. 28 On the other hand, a combination in
restraint of trade is an agreement or understanding between two or
more persons, in the form of a contract, trust, pool, holding company, or
other form of association, for the purpose of unduly restricting
competition, monopolizing trade and commerce in a certain commodity,
controlling its, production, distribution and price, or otherwise interfering
with freedom of trade without statutory authority. 29 Combination in
restraint of trade refers to the means while monopoly refers to the
end. 30
Article 186 of the Revised Penal Code and Article 28 of the New Civil Code
breathe life to this constitutional policy. Article 186 of the Revised Penal
Code penalizes monopolization and creation of combinations in restraint
of
trade, 31 while Article 28 of the New Civil Code makes any person who
shall engage in unfair competition liable for damages. 32
Respondents aver that sections 5(b), 6 and 9(b) implement the policies
and objectives of R.A. No. 8180. They explain that the 4% tariff
differential is designed to encourage new entrants to invest in refineries.
They stress that the inventory requirement is meant to guaranty
continuous domestic supply of petroleum and to discourage fly-by-night
operators. They also submit that the prohibition against predatory pricing
is intended to protect prospective entrants. Respondents manifested to
the Court that new players have entered the Philippines after
deregulation and have now captured 3% 5% of the oil market.
The validity of the assailed provisions of R.A. No. 8180 has to be decided
in light of the letter and spirit of our Constitution, especially section 19,
Article XII. Beyond doubt, the Constitution committed us to the free
enterprise system but it is a system impressed with its own distinctness.
Thus, while the Constitution embraced free enterprise as an economic
creed, it did not prohibit per se the operation of monopolies which can,
however, be regulated in the public interest. 33 Thus too, our free
enterprise system is not based on a market of pure and unadulterated
competition where the State pursues a strict hands-off policy and follows

the let-the-devil devour the hindmost rule. Combinations in restraint of

trade and unfair competitions are absolutely proscribed and the
proscription is directed both against the State as well as the private
sector. 34 This distinct free enterprise system is dictated by the need to
achieve the goals of our national economy as defined by section 1, Article
XII of the Constitution which are: more equitable distribution of
opportunities, income and wealth; a sustained increase in the amount of
goods and services produced by the nation for the benefit of the people;
and an expanding productivity as the key to raising the quality of life for
all, especially the underprivileged. It also calls for the State to protect
Filipino enterprises against unfair competition and trade practices.
Section 19, Article XII of our Constitution is anti-trust in history and in
spirit. It espouses competition. The desirability of competition is the
reason for the prohibition against restraint of trade, the reason for the
interdiction of unfair competition, and the reason for regulation of
unmitigated monopolies. Competition is thus the underlying principle of
section 19, Article XII of our Constitution which cannot be violated by R.A.
No. 8180. We subscribe to the observation of Prof. Gellhorn that the
objective of anti-trust law is "to assure a competitive economy, based
upon the belief that through competition producers will strive to satisfy
consumer wants at the lowest price with the sacrifice of the fewest
resources. Competition among producers allows consumers to bid for
goods and services, and thus matches their desires with society's
opportunity costs." 35 He adds with appropriateness that there is a
reliance upon "the operation of the 'market' system (free enterprise) to
decide what shall be produced, how resources shall be allocated in the
production process, and to whom the various products will be
distributed. The market system relies on the consumer to decide what
and how much shall be produced, and on competition, among producers
to determine who will manufacture it."
Again, we underline in scarlet that the fundamental principle espoused
by section 19, Article XII of the Constitution is competition for it alone can
release the creative forces of the market. But the competition that can
unleash these creative forces is competition that is fighting yet is fair.
Ideally, this kind of competition requires the presence of not one, not just
a few but several players. A market controlled by one player (monopoly)

or dominated by a handful of players (oligopoly) is hardly the market

where honest-to-goodness competition will prevail. Monopolistic or
oligopolistic markets deserve our careful scrutiny and laws which
barricade the entry points of new players in the market should be viewed
with suspicion.
Prescinding from these baseline propositions, we shall proceed to
examine whether the provisions of R.A. No. 8180 on tariff differential,
inventory reserves, and predatory prices imposed substantial barriers to
the entry and exit of new players in our downstream oil industry. If they
do, they have to be struck down for they will necessarily inhibit the
formation of a truly competitive market. Contrariwise, if they are
insignificant impediments, they need not be stricken down.
In the cases at bar, it cannot be denied that our downstream oil industry
is operated and controlled by an oligopoly, a foreign oligopoly at that.
Petron, Shell and Caltex stand as the only major league players in the oil
market. All other players belong to the lilliputian league. As the dominant
players, Petron, Shell and Caltex boast of existing refineries of various
capacities. The tariff differential of 4% therefore works to their immense
benefit. Yet, this is only one edge of the tariff differential. The other edge
cuts and cuts deep in the heart of their competitors. It erects a high
barrier to the entry of new players. New players that intend to equalize
the market power of Petron, Shell and Caltex by building refineries of
their own will have to spend billions of pesos. Those who will not build
refineries but compete with them will suffer the huge disadvantage of
increasing their product cost by 4%. They will be competing on an uneven
field. The argument that the 4% tariff differential is desirable because it
will induce prospective players to invest in refineries puts the cart before
the horse. The first need is to attract new players and they cannot be
attracted by burdening them with heavy disincentives. Without new
players belonging to the league of Petron, Shell and Caltex, competition
in our downstream oil industry is an idle dream.
The provision on inventory widens the balance of advantage of Petron,
Shell and Caltex against prospective new players. Petron, Shell and Caltex
can easily comply with the inventory requirement of R.A. No. 8180 in
view of their existing storage facilities. Prospective competitors again will

find compliance with this requirement difficult as it will entail a

prohibitive cost. The construction cost of storage facilities and the cost of
inventory can thus scare prospective players. Their net effect is to further
occlude the entry points of new players, dampen competition and
enhance the control of the market by the three (3) existing oil companies.
Finally, we come to the provision on predatory pricing which is defined as
". . . selling or offering to sell any product at a price unreasonably below
the industry average cost so as to attract customers to the detriment of
competitors." Respondents contend that this provision works against
Petron, Shell and Caltex and protects new entrants. The ban on predatory
pricing cannot be analyzed in isolation. Its validity is interlocked with the
barriers imposed by R.A. No. 8180 on the entry of new players. The
inquiry should be to determine whether predatory pricing on the part of
the dominant oil companies is encouraged by the provisions in the law
blocking the entry of new players. Text-writer
Hovenkamp, 36 gives the authoritative answer and we quote:
xxx xxx xxx
The rationale for predatory pricing is the sustaining of losses today that
will give a firm monopoly profits in the future. The monopoly profits will
never materialize, however, if the market is flooded with new entrants as
soon as the successful predator attempts to raise its price. Predatory
pricing will be profitable only if the market contains significant barriers to
new entry.
As aforediscsussed, the 4% tariff differential and the inventory
requirement are significant barriers which discourage new players to
enter the market. Considering these significant barriers established by
R.A. No. 8180 and the lack of players with the comparable clout of
PETRON, SHELL and CALTEX, the temptation for a dominant player to
engage in predatory pricing and succeed is a chilling reality. Petitioners'
charge that this provision on predatory pricing is anti-competitive is not
without reason.
Respondents belittle these barriers with the allegation that new players
have entered the market since deregulation. A scrutiny of the list of the
alleged new players will, however, reveal that not one belongs to the
class and category of PETRON, SHELL and CALTEX. Indeed, there is no

showing that any of these new players intends to install any refinery and
effectively compete with these dominant oil companies. In any event, it
cannot be gainsaid that the new players could have been more in number
and more impressive in might if the illegal entry barriers in R.A. No. 8180
were not erected.
We come to the final point. We now resolve the total effect of the
untimely deregulation, the imposition of 4% tariff differential on
imported crude oil and refined petroleum products, the requirement of
inventory and the prohibition on predatory pricing on the
constitutionality of R.A. No. 8180. The question is whether these
offending provisions can be individually struck down without invalidating
the entire R.A. No. 8180. The ruling case law is well stated by
authorAgpalo, 37 viz.:
xxx xxx xxx
The general rule is that where part of a statute is void as repugnant to the
Constitution, while another part is valid, the valid portion, if separable
from the invalid, may stand and be enforced. The presence of a
separability clause in a statute creates the presumption that the
legislature intended separability, rather than complete nullity of the
statute. To justify this result, the valid portion must be so far
independent of the invalid portion that it is fair to presume that the
legislature would have enacted it by itself if it had supposed that it could
not constitutionally enact the other. Enough must remain to make a
complete, intelligible and valid statute, which carries out the legislative
intent. . . .
The exception to the general rule is that when the parts of a statute are
so mutually dependent and connected, as conditions, considerations,
inducements, or compensations for each other, as to warrant a belief
that the legislature intended them as a whole, the nullity of one part will
vitiate the rest. In making the parts of the statute dependent, conditional,
or connected with one another, the legislature intended the statute to be
carried out as a whole and would not have enacted it if one part is void,
in which case if some parts are unconstitutional, all the other provisions
thus dependent, conditional, or connected must fall with them.

R.A. No. 8180 contains a separability clause. Section 23 provides that "if
for any reason, any section or provision of this Act is declared
unconstitutional or invalid, such parts not affected thereby shall remain
in full force and effect." This separability clause notwithstanding, we hold
that the offending provisions of R.A. No. 8180 so permeate its essence
that the entire law has to be struck down. The provisions on tariff
differential, inventory and predatory pricing are among the principal
props of R.A. No. 8180. Congress could not have deregulated the
downstream oil industry without these provisions. Unfortunately,
contrary to their intent, these provisions on tariff differential, inventory
and predatory pricing inhibit fair competition, encourage monopolistic
power and interfere with the free interaction of market forces. R.A. No.
8180 needs provisions to vouchsafe free and fair competition. The need
for these vouchsafing provisions cannot be overstated. Before
deregulation, PETRON, SHELL and CALTEX had no real competitors but did
not have a free run of the market because government controls both the
pricing and non-pricing aspects of the oil industry. After deregulation,
PETRON, SHELL and CALTEX remain unthreatened by real competition yet
are no longer subject to control by government with respect to their
pricing and non-pricing decisions. The aftermath of R.A. No. 8180 is a
deregulated market where competition can be corrupted and where
market forces can be manipulated by oligopolies.
The fall out effects of the defects of R.A. No. 8180 on our people have not
escaped Congress. A lot of our leading legislators have come out openly
with bills seeking the repeal of these odious and offensive provisions in
R.A. No. 8180. In the Senate, Senator Freddie Webb has filed S.B. No.
2133 which is the result of the hearings conducted by the Senate
Committee on Energy. The hearings revealed that (1) there was a need to
level the playing field for the new entrants in the downstream oil industry,
and (2) there was no law punishing a person for selling petroleum
products at unreasonable prices. Senator Alberto G. Romulo also filed S.B.
No. 2209 abolishing the tariff differential beginning January 1, 1998. He
declared that the amendment ". . . would mean that instead of just three
(3) big oil companies there will be other major oil companies to provide
more competitive prices for the market and the consuming
public." Senator Heherson T . Alvarez, one of the principal proponents of

R.A. No. 8180, also filed S.B. No. 2290 increasing the penalty for violation
of its section 9. It is his opinion as expressed in the explanatory note of
the bill that the present oil companies are engaged in cartelization
despite R.A. No. 8180, viz,:
xxx xxx xxx
Since the downstream oil industry was fully deregulated in February
1997, there have been eight (8) fuel price adjustments made by the three
oil majors, namely: Caltex Philippines, Inc.; Petron Corporation; and
Pilipinas Shell Petroleum Corporation. Very noticeable in the price
adjustments made, however, is the uniformity in the pump prices of
practically all petroleum products of the three oil companies. This,
despite the fact, that their selling rates should be determined by a
combination of any of the following factors: the prevailing peso-dollar
exchange rate at the time payment is made for crude purchases, sources
of crude, and inventory levels of both crude and refined petroleum
products. The abovestated factors should have resulted in different,
rather than identical prices.
The fact that the three (3) oil companies' petroleum products are
uniformly priced suggests collusion, amounting to cartelization, among
Caltex Philippines, Inc., Petron Corporation and Pilipinas Shell Petroleum
Corporation to fix the prices of petroleum products in violation of
paragraph (a), Section 9 of R.A. No. 8180.
To deter this pernicious practice and to assure that present and
prospective players in the downstream oil industry conduct their business
with conscience and propriety, cartel-like activities ought to be severely
penalized.
Senator Francisco S. Tatad also filed S.B. No. 2307 providing for a uniform
tariff rate on imported crude oil and refined petroleum products. In the
explanatory note of the bill, he declared in no uncertain terms that ". .
. the present set-up has raised serious public concern over the way the
three oil companies have uniformly adjusted the prices of oil in the
country, an indication of a possible existence of a cartel or a cartel-like
situation within the downstream oil industry. This situation is mostly
attributed to the foregoing provision on tariff differential, which has

effectively discouraged the entry of new players in the downstream oil

industry."
In the House of Representatives, the moves to rehabilitate R.A. No. 8180
are equally feverish. Representative Leopoldo E. San Buenaventura has
filed H.B. No. 9826 removing the tariff differential for imported crude oil
and imported refined petroleum products. In the explanatory note of the
bill, Rep. Buenaventura explained:
xxx xxx xxx
As we now experience, this difference in tariff rates between imported
crude oil and imported refined petroleum products, unwittingly provided
a built-in-advantage for the three existing oil refineries in the country and
eliminating competition which is a must in a free enterprise economy.
Moreover, it created a disincentive for other players to engage even
initially in the importation and distribution of refined petroleum products
and ultimately in the putting up of refineries. This tariff differential
virtually created a monopoly of the downstream oil industry by the
existing three oil companies as shown by their uniform and capricious
pricing of their products since this law took effect, to the great
disadvantage of the consuming public.
Thus, instead of achieving the desired effects of deregulation, that of free
enterprise and a level playing field in the downstream oil industry, R.A.
8180 has created an environment conducive to cartelization,
unfavorable, increased, unrealistic prices of petroleum products in the
country by the three existing refineries.
Representative Marcial C. Punzalan, Jr., filed H.B. No. 9981 to prevent
collusion among the present oil companies by strengthening the
oversight function of the government, particularly its ability to subject to
a review any adjustment in the prices of gasoline and other petroleum
products. In the explanatory note of the bill, Rep. Punzalan, Jr., said:
xxx xxx xxx
To avoid this, the proposed bill seeks to strengthen the oversight function
of government, particularly its ability to review the prices set for gasoline
and other petroleum products. It grants the Energy Regulatory Board
(ERB) the authority to review prices of oil and other petroleum products,

as may be petitioned by a person, group or any entity, and to

subsequently compel any entity in the industry to submit any and all
documents relevant to the imposition of new prices. In cases where the
Board determines that there exist collusion, economic conspiracy, unfair
trade practice, profiteering and/or overpricing, it may take any step
necessary to protect the public, including the readjustment of the prices
of petroleum products. Further, the Board may also impose the fine and
penalty of imprisonment, as prescribed in Section 9 of R.A. 8180, on any
person or entity from the oil industry who is found guilty of such
prohibited acts.
By doing all of the above, the measure will effectively provide Filipino
consumers with a venue where their grievances can be heard and
immediately acted upon by government.
Thus, this bill stands to benefit the Filipino consumer by making the pricesetting process more transparent and making it easier to prosecute those
who perpetrate such prohibited acts as collusion, overpricing, economic
conspiracy and unfair trade.
Representative Sergio A.F . Apostol filed H.B. No. 10039 to remedy an
omission in R.A. No. 8180 where there is no agency in government that
determines what is "reasonable" increase in the prices of oil
products. Representative Dente O. Tinga, one of the principal sponsors of
R.A. No. 8180, filed H.B. No. 10057 to strengthen its anti-trust provisions.
He elucidated in its explanatory note:
xxx xxx xxx
The definition of predatory pricing, however, needs to be tightened up
particularly with respect to the definitive benchmark price and the
specific anti-competitive intent. The definition in the bill at hand which
was taken from the Areeda-Turner test in the United States on predatory
pricing resolves the questions. The definition reads, "Predatory pricing
means selling or offering to sell any oil product at a price below the
average variable cost for the purpose of destroying competition,
eliminating a competitor or discouraging a competitor from entering the
market."

The appropriate actions which may be resorted to under the Rules of

Court in conjunction with the oil deregulation law are adequate. But to
stress their availability and dynamism, it is a good move to incorporate all
the remedies in the law itself. Thus, the present bill formalizes the
concept of government intervention and private suits to address the
problem of antitrust violations. Specifically, the government may file an
action to prevent or restrain any act of cartelization or predatory pricing,
and if it has suffered any loss or damage by reason of the antitrust
violation it may recover damages. Likewise, a private person or entity
may sue to prevent or restrain any such violation which will result in
damage to his business or property, and if he has already suffered
damage he shall recover treble damages. A class suit may also be
allowed.
To make the DOE Secretary more effective in the enforcement of the law,
he shall be given additional powers to gather information and to require
reports.
Representative Erasmo B. Damasing filed H.B. No. 7885 and has a more
unforgiving view of R.A. No. 8180. He wants it completely repealed. He
explained:
xxx xxx xxx
Contrary to the projections at the time the bill on the Downstream Oil
Industry Deregulation was discussed and debated upon in the plenary
session prior to its approval into law, there aren't any new players or
investors in the oil industry. Thus, resulting in practically a cartel or
monopoly in the oil industry by the three (3) big oil companies, Caltex,
Shell and Petron. So much so, that with the deregulation now being
partially implemented, the said oil companies have succeeded in
increasing the prices of most of their petroleum products with little or no
interference at all from the government. In the month of August, there
was an increase of Fifty centavos (50) per liter by subsidizing the same
with the OPSF, this is only temporary as in March 1997, or a few months
from now, there will be full deregulation (Phase II) whereby the increase
in the prices of petroleum products will be fully absorbed by the
consumers since OPSF will already be abolished by then. Certainly, this

would make the lives of our people, especially the unemployed ones,
doubly difficult and unbearable.
The much ballyhooed coming in of new players in the oil industry is quite
remote considering that these prospective investors cannot fight the
existing and well established oil companies in the country today, namely,
Caltex, Shell and Petron. Even if these new players will come in, they will
still have no chance to compete with the said three (3) existing big oil
companies considering that there is an imposition of oil tariff differential
of 4% between importation of crude oil by the said oil refineries paying
only 3% tariff rate for the said importation and 7% tariff rate to be paid
by businessmen who have no oil refineries in the Philippines but will
import finished petroleum/oil products which is being taxed with 7%
tariff rates.
So, if only to help the many who are poor from further suffering as a
result of unmitigated increase in oil products due to deregulation, it is a
must that the Downstream Oil Industry Deregulation Act of 1996, or
R.A.8180 be repealed completely.
Various resolutions have also been filed in the Senate calling for
an immediate and comprehensive review of R.A. No. 8180 to prevent the
downpour of its ill effects on the people. Thus, S. Res. No. 574 was filed
by Senator Gloria M. Macapagal entitled Resolution "Directing the
Committee on Energy to Inquire Into The Proper Implementation of the
Deregulation of the Downstream Oil Industry and Oil Tax Restructuring As
Mandated Under R.A. Nos. 8180 and 8184, In Order to Make The
Necessary Corrections In the Apparent Misinterpretation Of The Intent
And Provision Of The Laws And Curb The Rising Tide Of Disenchantment
Among The Filipino Consumers And Bring About The Real Intentions And
Benefits Of The Said Law." Senator Blas P. Ople filed S. Res. No. 664
entitled resolution "Directing the Committee on Energy To Conduct An
Inquiry In Aid Of Legislation To Review The Government's Oil
Deregulation Policy In Light Of The Successive Increases In
Transportation, Electricity And Power Rates, As well As Of Food And
Other Prime Commodities And Recommend Appropriate Amendments To
Protect The Consuming Public." Senator Ople observed:
xxx xxx xxx

WHEREAS, since the passage of R.A. No. 8180, the Energy Regulatory
Board (ERB) has imposed successive increases in oil prices which has
triggered increases in electricity and power rates, transportation fares, as
well as in prices of food and other prime commodities to the detriment of
our people, particularly the poor;
WHEREAS, the new players that were expected to compete with the oil
cartel-Shell, Caltex and Petron-have not come in;
WHEREAS, it is imperative that a review of the oil deregulation policy be
made to consider appropriate amendments to the existing law such as an
extension of the transition phase before full deregulation in orderto give
the competitive market enough time to develop;
WHEREAS, the review can include the advisability of providing some
incentives in order to attract the entry of new oil companies to effect a
dynamic competitive market;
WHEREAS, it may also be necessary to defer the setting up of the
institutional framework for full deregulation of the oil industry as
mandated under Executive Order No. 377 issued by President Ramos last
October 31, 1996 . . .
Senator Alberto G. Romulo filed S. Res. No. 769 entitled resolution
"Directing the Committees on Energy and Public Services In Aid Of
Legislation To Assess The Immediate Medium And Long Term Impact of
Oil Deregulation On Oil Prices And The Economy." Among the reasons for
the resolution is the finding that "the requirement of a 40-day stock
inventory effectively limits the entry of other oil firms in the market with
the consequence that instead of going down oil prices will rise."
Parallel resolutions have been filed in the House of
Representatives. Representative Dante O. Tinga filed H. Res. No. 1311
"Directing The Committee on Energy To Conduct An Inquiry, In Aid of
Legislation, Into The Pricing Policies And Decisions Of The Oil Companies
Since The Implementation of Full Deregulation Under the Oil
Deregulation Act (R.A. No. 8180) For the Purpose of Determining In the
Context Of The Oversight Functions Of Congress Whether The Conduct Of
The Oil Companies, Whether Singly Or Collectively, Constitutes
Cartelization Which Is A Prohibited Act Under R.A. No. 8180, And What

Measures Should Be Taken To Help Ensure The Successful

Implementation Of The Law In Accordance With Its Letter And Spirit,
Including Recommending Criminal Prosecution Of the Officers Concerned
Of the Oil Companies If Warranted By The Evidence, And For Other
Purposes." Representatives Marcial C. Punzalan, Jr. Dante O. Tinga and
Antonio E. Bengzon III filed H.R. No. 894 directing the House Committee
on Energy to inquire into the proper implementation of the deregulation
of the downstream oil industry. House Resolution No. 1013 was also filed
by Representatives Edcel C. Lagman, Enrique T . Garcia, Jr. and Joker
P. Arroyo urging the President to immediately suspend the
implementation of E.O. No. 392.
In recent memory there is no law enacted by the legislature afflicted with
so much constitutional deformities as R.A. No. 8180. Yet, R.A. No. 8180
deals with oil, a commodity whose supply and price affect the ebb and
flow of the lifeblood of the nation. Its shortage of supply or a slight,
upward spiral in its price shakes our economic foundation. Studies show
that the areas most impacted by the movement of oil are food
manufacture, land transport, trade, electricity and water. 38 At a time
when our economy is in a dangerous downspin, the perpetuation of
R.A. No. 8180 threatens to multiply the number of our people with bent
backs and begging bowls. R.A. No. 8180 with its anti-competition
provisions cannot be allowed by this Court to stand even while Congress is
working to remedy its defects.
The Court, however, takes note of the plea of PETRON, SHELL and CALTEX
to lift our restraining order to enable them to adjust upward the price of
petroleum and petroleum products in view of the plummeting value of
the peso. Their plea, however, will now have to be addressed to the
Energy Regulatory Board as the effect of the declaration of
unconstitutionality of R.A. No. 8180 is to revive the former laws it
repealed. 39 The length of our return to the regime of regulation depends
on Congress which can fasttrack the writing of a new law on oil
deregulation in accord with the Constitution.
With this Decision, some circles will chide the Court for interfering with
an economic decision of Congress. Such criticism is charmless for the
Court is annulling R.A. No. 8180 not because it disagrees with

deregulation as an economic policy but because as cobbled by Congress

in its present form, the law violates the Constitution. The right call
therefor should be for Congress to write a new oil deregulation law that
conforms with the Constitution and not for this Court to shirk its duty of
striking down a law that offends the Constitution. Striking down R.A. No.
8180 may cost losses in quantifiable terms to the oil oligopolists. But the
loss in tolerating the tampering of our Constitution is not quantifiable in
pesos and centavos. More worthy of protection than the supra-normal
profits of private corporations is the sanctity of the fundamental
principles of the Constitution. Indeed when confronted by a law violating
the Constitution, the Court has no option but to strike it down dead. Lest
it is missed, the Constitution is a covenant that grants and
guarantees both the political and economic rights of the people. The
Constitution mandates this Court to be the guardian not only of the
people's political rights but their economic rights as well. The protection
of the economic rights of the poor and the powerless is of greater
importance to them for they are concerned more with the exoterics of
living and less with the esoterics of liberty. Hence, for as long as the
Constitution reigns supreme so long will this Court be vigilant in
upholding the economic rights of our people especially from the
onslaught of the powerful. Our defense of the people's economic rights
may appear heartless because it cannot be half-hearted.
IN VIEW WHEREOF, the petitions are granted. R.A. No. 8180 is declared
unconstitutional and E.O. No. 372 void.
SO ORDERED.
Regalado, Davide, Jr., Romero, Bellosillo and Vitug, JJ., concur.
Mendoza, J., concurs in the result.
Narvasa, C.J., is on leave.

FACTS:
The petitions challenge the constitutionality of RA No. 8180 entitled An
Act Deregulating the Downstream Oil Industry and For Other Purposes.
The deregulation process has two phases: (a) the transition phase (Aug.

12, 1996) and the (b) full deregulation phase (Feb. 8, 1997 through EO
No. 372).
Sec. 15 of RA No. 8180 constitutes an undue delegation of legislative
power to the President and the Sec. of Energy because it does not
provide a determinate or determinable standard to guide the Executive
Branch in determining when to implement the full deregulation of the
downstream oil industry, and the law does not provide any specific
standard to determine when the prices of crude oil in the world market
are considered to be declining nor when the exchange rate of the peso to
the US dollar is considered stable.
Issue:
w/n the provisions of RA No. 8180 and EO No. 372 is unconstitutional.
sub-issue: (a) w/n sec. 15 violates the constitutional prohibition on undue
delegation of power, and (b) w/n the Executive misapplied RA No. 8180
when it considered the depletion of the OPSF fund as factor in fully
deregulating the downstream oil industry in Feb. 1997.
HELD/RULING:
(a) NO. Sec. 15 can hurdle both the completeness test and the sufficient
standard test. RA No. 8180 provided that the full deregulation will start at
the end of March 1997 regardless of the occurrence of any event. Thus,
the law is complete on the question of the final date of full deregulation.
Sec. 15 lays down the standard to guide the judgment of the President
he is to time it as far as practicable when the prices of crude oil and
petroleum in the world market are declining and when the exchange rate
of the peso to the US dollar is considered stable.
Webster defines practicable as meaning possible to practice or
perform, decline as meaning to take a downward direction, and
stable as meaning firmly established.
(b) YES. Sec. 15 did not mention the depletion of the OPSF fund as a
factor to be given weight by the Executive before ordering full
deregulation. The Executive department failed to follow faithfully the
standards set by RA No. 8180 when it co0nsidered the extraneous factor
of depletion of the OPSF fund. The Executive is bereft of any right to alter

either by subtraction or addition the standards set in RA No. 8180 for it

has no powers to make laws.