In the commodity futures market, speculators enter into contracts for the purchase and delivery of commodities not because they are interested in acquiring the said commodities. They enter into futures contracts in the hope that by the time of the supposed delivery, the price of the commodity has risen more than the agreed price. The seller would then settle by paying the difference between the spot price at the time of the supposed delivery and the price stipulated in the contract. The buyer thus earns a profit. If the spot price of the commodity at the time of the supposedly delivery is lower than the price in the contract, the buyer loses and pays the seller the difference. The settlement can take place even without the delivery of the commodity.
In the stock market, big buyers can push the prices of a stock of a company up by purchasing a lot of shares and creating a bandwagon effect. They can then unload, meaning sell to cash in, or hold on to the shares while the prices keep going up. The prices of a stock can keep going up for as long as there are buyers willing to buy at a progressively increasing price until the “bubble bursts” because the true value of the stocks of the company is revealed when it issues its financial statement or that the prices are too high that nobody wants to buy the shares anymore for fear that the price will already go down.
In the commodity futures market, big buyers/speculators can also push the prices of commodities up by purchasing in bulk, triggering a bandwagon effect. The prices can even go higher if there are fears that the commodity, in this case oil, may experience a shortage in supply or if there is an expected increase in demand. Thus, speculations of possible shortages because of a possible war between the U.S, and Iran coupled with massive buying by speculators purportedly to prepare for the probable shortage triggered an increase in the prices of petroleum products. Likewise, the onset of the “driving season” in the U.S, and the corresponding projected increase in demand for petroleum products also coupled with massive buying by speculators also triggered an increase in prices of oil. To make the problem worse, even as the expected shortage did not materialize, the price of oil in the commodity futures market remains high and is continuously being pushed upwards by speculators who keep on spreading grim scenarios of possible shortages while reaping profits. This can take place until the market “overheats,” meaning nobody wants to purchase oil futures anymore because the price has gone too high.
Thus, speculators are able to manipulate to push the prices of oil upwards to earn profits. Aren’t they insidious and parasitic? They profit from the misery of the billions of consumers who are reeling from increases in the prices of basic commodities and the rates of basic utilities and services caused by spikes in the prices of oil and petroleum products.
Deregulation makes it worse
The deregulation of the oil industry has made the Filipino people more vulnerable to the manipulations of the oil cartel and of speculators. With the deregulation, oil companies are able to increase pump prices at will. The government only “monitors” and does not regulate the prices of petroleum products, which is basic in everything from the operations of factories and utilities, transport of commodities and commuters, to the electrification of offices and households. In fact, the deregulation of the oil industry not only makes us vulnerable to the manipulations of the cartel and speculators, it practically feeds us to them to satisfy their hunger for profits.
During the late 1960s, a ten centavo per liter increase in the pump prices of gasoline and diesel triggered a series of protest actions which led to the Diliman commune, when UP students barricaded themselves inside the Diliman campus of the University of the Philippines.
Now we have been experiencing a series of increases in the pump prices of petroleum products pushing the prices of basic commodities and the rates of basic utilities and services upwards. The Macapagal-Arroyo administration is not doing anything. It continuously ignores the calls for different solutions such as the scrapping of the oil deregulation law, the nationalization of the oil industry, the bulk purchasing by government to be sold to companies at an exchange market, price controls, etc. At most, it sometimes asks oil companies to delay the increase in prices for a few days or weeks when it feels that it is in a critical situation and the increase may trigger protest actions.
How long will we be able to absorb the increases in prices caused by oil price spikes? How much do we have to bear before taking action?(Bulatlat.com)