This story
was taken from Bulatlat, the Philippines's alternative weekly
newsmagazine (www.bulatlat.com, www.bulatlat.net, www.bulatlat.org).
Vol. VI, No. 11, April 23-29, 2006
ANALYSIS The
country is again facing the prospect of oil price spikes. Why? Can nothing be
done about it? BY
BENJIE OLIVEROS The country, and the world, are again being
threatened with the probability of run-away increases in the prices of oil, gas,
and its derivatives. New
York’s main contract, light sweet crude for June delivery, reached a peak of
$73.69 per barrel in U.S. trade Thursday before easing down by 84 cents at 72.85
dollars a barrel. Brent North Sea crude peaked at $74 per barrel in London trade
Thursday before going down to $73.28 dollars per barrel. Governments are again scrambling for
alternative energy sources. Aside from this, the IMF, characteristically,
proposes an increase in taxes, such as an emission fee for vehicle owners and
operators, to lower the demand for oil. These solutions have been tried but it
lowered neither the price of nor the demand for oil. The frantic searches for
alternatives have been going on for years although these come intermittently
with increases in oil prices. Vehicle owners and operators already carry the
burden of numerous taxes and fees such as excise tax on petroleum products, road
users’ tax, taxes on automobiles, the recent 12 percent E-VAT (Expanded
Value-Added Tax), etc. But time and again, countries and peoples
have to swallow bitter increases in the prices of oil. Oil and gas are perhaps the only commodities
that have constantly increasing prices. The prices of gold and other minerals
fluctuate as more sources are identified and technology lowers the cost of
extraction and processing. The prices of cars, appliances, computers, and other
consumer durables become more affordable as technology lowers production costs.
But the price of oil just keep on increasing
even if more sources are identified, processing methods are modernized, and
transport costs are minimized as more pipelines are laid out. Oil is not even
the main component of production. Apologists of oil companies
say that production capacities are barely able to cope with demand and any
disruption caused by natural and man-made disasters such as hurricanes and
earthquakes, wars and embargos will trigger a supply shortage. They also claim
that the sources of oil are limited and eventually it will dry out. While there may be an
element of truth to these dire predictions, fears of shortages never happened
except in the 1970s when the Organization of Petroleum Exporting Countries
(OPEC) decided to limit production and exportation to be able to increase
prices. But now even an increase in production by OPEC does not lower prices.
The effects of Hurricane
Katrina; the civil war in Iraq and tense relations with Iran, which is being
instigated by the U.S. anyway; restlessness in Nigeria, Sudan, Saudi Arabia; the
invasion of Kuwait; threats of attack by Al-Queda; the growth of the economy of
China; the onset of summer, spring, winter, or fall have been given as reasons
for oil price increases. These events happened without having a critical impact
in the balance between supply and demand. And yet prices of oil increased. World
oil consumption was less than projected in 2005 but oil prices increased. In
the Philippines, prices of oil products increased by an average of seven to
twelve pesos per liter in 2005. The April 20 editorial of
the Philippine Daily Inquirer (PDI) attributed this to the insatiable greed for
profits of oil companies who cash in during times of crisis. The worst part of
it is that oil companies profit not only from real crisis or disasters but also
from probable, instigated, and invented ones. Monopoly pricing by oil
companies dominated by three big corporations, Chevron Texaco, Exxon Mobil, and
Royal Dutch Shell, enable them to increase prices at will. They set, dictate,
and standardize prices from bulk purchases up to the level of gasoline pumping
stations. Wars are conducted to
tighten the stranglehold of these companies over the supply and distribution of
oil and gas. Afghanistan was invaded to be able to lay down a pipeline to Europe
while Iraq is the second richest source of oil. The Middle East is an important
and critical region for the U.S. design for world domination contained in the
1992 Defense Policy Guideline and the 1997 Project for a New American Century.
Oil companies are not the
only ones that profit from crisis and disasters, both real and imagined.
Traders and speculators in oil also profit from price spikes. Hedging and speculation
take place at the New York Mercantile Exchange (NYMEX) and the Intercontinental
Exchange (ICE), formerly the International Petroleum Exchange (IPE). These are
two commodity future markets where light sweet crude and Brent North Sea Crude
are traded in New York and London, respectively. The NYMEX is a registered U.S.
corporation. The IPE, based in London, was bought and absorbed by ICE, also a
U.S. corporation, in 2001. Negotiated prices in these two exchanges are
benchmarks for world oil prices. While organized to protect
companies from price fluctuations of necessary commodities, such as oil in this
case, profit-taking, or buying oil in bulk when the price is low and selling it
when the price is high, is common in these markets. In fact, speculation and
profit-taking is so common that prices overheat, meaning prices increase to a
point where there are no more buyers. This is the only reason for reductions in
oil prices. The Filipino people are
more vulnerable to profiteering by oil companies and speculators because of the
Oil Deregulation Law of 1998. Oil prices increased by 400 percent from 1996,
before oil deregulation, to 2005. Below is a table of average oil prices
supplied by Ibon Foundation.
Date effective
Premium
Unleaded
Regular
AV Turbo
Kerosene
Diesel
Fuel Oil
LPG
Ave
1996 ave
9.80
9.79
9.20
10.18
6.92
7.21
3.72
6.10
5.95
2001ave
18.16
17.57
16.58
na
13.51
13.96
na
na
na
2002 ave
17.82
17.22
16.24
18.41
13.56
13.89
11.21
10.38
na
2003 ave
20.73
20.13
19.14
20.47
15.95
15.72
13.40
12.29
15.69
2004 ave
25.76
25.11
24.17
23.96
20.59
20.10
14.40
15.35
19.21
Nov. 2005
35.77
36.06
33.92
33.82
32.76
31.09
20.99
22.29
na The Arroyo government is
kowtowing to oil companies and speculators by claiming that nothing can be done
to mitigate the impact of oil price spikes. In the immediate, it can
scrap the Oil Deregulation Law and set the price of oil based on a study of
world oil prices and a reasonable rate of profit for oil companies. The P11.8
billion combined profits of Petron Corp. and Pilipinas Shell in 2005,
representing an 88 percent increase compared to 2004, is scandalous considering
the hardships and poverty made worse by oil price increases. In the medium-term, the
government can buy the country’s oil needs in bulk to be able to negotiate for a
better price and organize a local exchange where it can sell and distribute the
oil products it purchases. In the long-term, it can
nationalize the oil industry, to include the extraction, refinery, allocation,
and distribution of oil. To be able to put these
measures into place, the Filipino people must have a government that is truly
sovereign, pro-people, democratic, transparent and accountable. Bulatlat
© 2006 Bulatlat
■
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Oil Squeeze
Bulatlat