The Independent Philippine Petroleum Companies Association (IPCA) announced that the public will again expect (dread seems to be a more appropriate word) another round of fuel price increases averaging at P0.50 per liter in the coming weeks. This, IPCA Chairman Glen Yu said, will have to be implemented because of a $4 dollar per barrel increase in the price of oil in the world market, which he finds confusing because of the adequate supply of oil. Who is then responsible for the spikes in oil prices?
BY BENJIE OLIVEROS
Vol. VII, No. 26, August 5-11, 2007
The Independent Philippine Petroleum Companies Association (IPCA) announced that the public will again expect (dread seems to be a more appropriate word) another round of fuel price increases averaging at P0.50 per liter in the coming weeks. He said that they have to recover at least another P1 per liter, aside from the P0.50 per liter increase they implemented this weekend, because Dubai crude has been averaging at $69.49 per barrel in July from $65.79 in June.
With industry calculations of a P0.35 per liter increase in pump prices for every $1 per barrel increase in the price of oil, he said oil companies should have charged P1.40 more this month. But because of the P0.50 per liter increase this weekend and the strengthening of the peso, another P0.50 per liter increase may suffice.
He added that they are quite confused why oil prices in the world market are increasing despite the adequate supply.
Actually, oil prices began its upward movement ever since the onset of the summer season. Oil companies and fund managers have been expecting pressures on the supply because summer in the U.S. is supposedly a “driving season,” when people are wont to use their vehicles more for long drives to vacation spots and to visit relatives. But contrary to projections, U.S. oil inventories remain stable. Inspite of this, oil prices continue to increase.
Why? Ask the cartel and speculators, also known as hedge fund managers.
There are three big major players plus a few minor players which control both the upstream – exploration, drilling, and production – and downstream – transport, refining, distribution and marketing – processes of oil in the world. The three big oil companies are ExxonMobil, Royal Dutch Shell, and BP. They are vertically integrated, meaning they control both their upstream and downstream processes all over the world: from the drilling operations to your friendly service station.
ExxonMobil emerged from Standard Oil of the Rockefellers of the U.S. Formed in 1865 by John D. Rockefeller, Standard Oil bought out small refineries, built a pipeline system, and controlled the transport of oil from the oil fields to the consumer. Standard Oil also formed a marketing and sales company, Esso. Its operations were integrated into Standard Oil Trust. Standard Oil’s control over the prices of petroleum products in the U.S caused a public outcry. Ten years after its formation, a court decision in Ohio ordered that the Standard Oil Trust be dissolved. But Rockefeller was able to circumvent the decision by reorganizing the Standard Oil Trust into Standard Oil of New Jersey. Due to persistent public pressure, the U.S. Supreme Court in 1911 ordered that the company break up into several independent companies. But these were controlled by Rockefeller’s partners. Eventually, these “independent” companies reintegrated into ExxonMobil, which now operates in 200 countries.