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Is the Arroyo Government Doing Enough?The Arroyo government is saying that it could not be blamed for the price spikes because the problem is international in nature. That is only half the truth. BY BENJIE OLIVEROS The Filipino people have barely been able to breathe after the shock of the P1 per liter increase in oil prices last May 3 when we were informed that more increases are forthcoming. In fact, the warning is that twice a week increases are to be expected in stead of the weekly surprises we are being subjected to. The reason being put forward is that oil companies need to recover losses of around P6 to P7 pesos per liter. (It’s as if oil companies are losing money and they do not occupy the six of the top 10 companies of Fortune Magazine’s Global 100) But that grim announcement came before oil at commodity futures market hit another record high. The news that the Arroyo government is set to reduce price subsidies for rice being imported and sold by the National Food Authority (NFA) have barely sinked in when another round of spikes in rice prices are in the offing with the increase in prices of the country’s staple food also in commodity futures market. The Filipino people are still wracking their brains on how to cope with rising inflation, which reached around 8 percent in April, according to the Arroyo government’s conservative estimates, when even higher prices are to be expected with the oil price spikes, which is projected to reach $200 per barrel this year or the next. With the Filipino people already experiencing difficult times and could expect more hardships in the future, the question is: Is the Arroyo government doing enough to protect the people’s welfare? The Arroyo government is saying that it could not be blamed for the price spikes because the problem is international in nature. Is it? There is some truth in what the Arroyo government is saying. Oil prices are hitting record highs and the tandem of oil companies and speculators are to be blamed. Fears of shortages due to increasing demand, falling inventories, and probable disruptions in production caused by wars and political instability have always been cited as the reasons for oil price spikes. But there has never been any supply shortage so far and yet oil prices have continuously been increasing. In fact, the Organization of Petroleum Exporting Countries (OPEC) has persistently refused to increase production because there is enough supply. And if one is to read the news carefully, the benchmark of prices being cited are that for deliveries months ahead at the New York Mercantile Exchange - for light, sweet crude - and the ICE, for London Brent. The May 8 increase to $123.75 for US crude, and $122.32 for London Brent amid little consumer is demand is revealing. As Shokri Ghanem, head of Libya’s National Oil Corporation, aptly puts is, “"It is the same old story-speculation and geopolitics." Who are profiting from these? They are the speculators, exemplified by the owners and clients of finance investment houses such as ING, JP Morgan Chase, American International Group, Goldman Sachs, Merrill Lynch, Bear Stearns as well as banks cum investment houses such as the Citigroup, Bank of America - the same gainers and eventual losers in the subprime mortgage crisis in the US - and oil companies such as Exxon Mobil (no. 2 in the Global 100), Royal Dutch Shell (no. 3), BP (no. 4), Chevron Texaco (no. 7), ConcoPhillips (no.9), and Total (no. 10). Their ranking in 2007 was based on revenues but these oil companies are, undoubtedly, also among the top in terms of profits - Exxon at $39.500 Billion, Royal Dutch Shell $25.442 B, BP $22 B, Chevron $17.138 B, ConocoPhillips $15.55 B, Total $14.764 B. Their profits are equalled only by finance investment houses and big manufacturers such as General Electric, a supplier of military equipment and armaments. Exxon posted an $18.9 B profit during the 1st quarter of 2008 when prices averaged $98 per barrel. Royal Dutch Shell and BP likewise posted big first quarter earnings. But oil companies are grappling with weak production volumes - indicating a glut in supplies and weakening demand - and problems in passing on higher prices to customers. The gainers in the increases in rice prices are not as visible. But increases in the price of rice, as well as wheat and soybean, are being pushed by commodity futures markets. Financial speculators trading at the Chicago Board of Trade, have been responsible for about an 80 percent increase in rice prices this year. The Chicago Board of Trade is a commodity futures market that is known for trading in agricultural commodities before it expanded to gold, silver, and financial futures such as bonds. And the most recent increase in rice prices was brought about by trading for July deliveries. Rice, according to a May 1 report by the Philippine Daily Inquirer, is being looked at as the next big commodity play - after oil, which is at the point of decreasing demand because prices have gone too high, and the subprime mortgage debacle. Rice producing countries, hoping to cash in on the spikes in prices, are moving towards forming an organization of rice producing countries, similar to that of OPEC. But apparently, they have not yet cashed in on the rice price spikes as they are grappling to stabilize rice prices in their respective countries. While the price spikes in oil and rice are brought about by speculation in the global market, the programs and policies, or the lack of it, of the Arroyo government is making life worse for the Filipino people. Its policy of liberalizing trade, including agricultural products, and its refusal to subsidize and support domestic agricultural production, has resulted in the country retrogressing from a net exporter to being the biggest importer of rice. This made the country vulnerable to speculative attacks in the international market. The Philippines, in its frantic efforts to import and stockpile rice, is even being blamed for the current increases in rice prices. The Arroyo government’s policy of deregulation, which includes the deregulation of the oil and rice industries, enables manufacturers and traders of basic commodities, as well as public utilities, to increase prices without prior justification. The admonition of Energy Sec. Angelo Reyes for oil companies to explain the P1 per liter increase in oil last May 3 is after the fact and useless. It should have been done prior to the increases. The Arroyo government’s policy of privatization leaves the people at the mercy of local and foreign corporations. Worse, its policy of “balancing” the budget to be able to show foreign creditors and investors that it could guarantee payment of its debts and repatriation of capital and profits of foreign corporations increases the tax burden of the people while depriving them of essential government services and support. The Arroyo government can do a lot to mitigate the sufferings and protect the Filipino people from the profiteering designs of foreign monopoly corporations and financial speculators. It could subsidize food production and distribution but it is against the government’s policy of liberalization. It could control the prices of basic commodities, services, and utilities but it is against the government’s policy of deregulation. It could ensure that essential services and support are provided to the needy but it is against the government’s policy of privatization. And it could remove the RVAT on oil but it would not sit well with the government’s foreign creditors and investors. Because of these the Arroyo government’s responses are too late and too little. It finally decided to support agricultural production but the subsidies are too small, could benefit only a few, and was done only when the rice crisis is in full effect. It is subsidizing NFA rice but it is reaching only a few and its panic importations are helping speculators more than the Filipino people. The Arroyo government is trying to put up a show of warning oil companies but its attempts were practically ignored. It is now running after Meralco to give the semblance of exposing anomalies in the pricing policies of corporations but it is merely zeroing on those perceived to be supporting opposition to its rule; not unlike what it did to local government officials who are part of the opposition. And it flatly refuses to remove the RVAT on oil to ease prices. Is the Arroyo government doing enough to mitigate the sufferings and protect the Filipino people? No, and worse, it is taking the wrong side: the side of big financial speculators, foreign monopoly corporations and their local partners. Bulatlat ( categories: )
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