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Gov’t must take steps to stop skyrocketing oil prices

Since the start of the year, oil pump prices have increased 11 times; diesel for a total of P8.10 per liter, P6.10 per liter for gasoline, and P7.50 per liter for kerosene. Prices of liquefied petroleum gas (LPG) have also increased three times since March for a total of P3 per kilogram.

The oil price increases have led to increases in fare and prices of commodities: minimum jeepney fare has increased from P7.50 to P8. A petition to increase jeepney fare to P9.50 has recently been filed. Taxi flagdown rate has increased from P30 to P40 and per 250 km rate has increased by P1. Bus fares have also increased. Prices of bread, vegetables and other commodities have also risen.
The oil price hikes and the consequent increase in commodity prices and fares spell further poverty and hardships for majority of Filipinos. It should be considered that currently, 70% of Filipinos barely survive, living with less than P104 per day. Hunger rates have reached record high levels with 24% or an equivalent of 4.4 million families experiencing involuntary hunger.

The big oil companies and government spokespersons would like the public to believe that the oil price hikes are inevitable and justified, pointing to the rise in world market prices coupled with the political instability in the Middle East and North Africa. A deeper look however, will reveal that these are mere excuses to cover up the real reasons behind the hikes: overpricing of local pump prices, price and supply manipulation possible because of monopoly control of world oil industry, and speculation by big financial institutions.

Oil overpricing: pure theft

It has been established in several reports, both by non government and government institutions, that the Big 3 – Shell, Caltex and Petron, which controls of about 80% of the local oil market – have in fact been overpricing their local pump products. Bayan estimates an average of P7.50 per liter overprice since January 2008 which means P369.65 million additional take for oil companies daily. The computation is based on ideal impact of world price and exchange rate movements on the pump prices compared to actual price adjustments.

This does not include the take of the oil companies when they raise prices immediately while they actually have an inventory for at least 45-60 days of stocks which they bought at lower prices. The companies have actually admitted to the swindle and have tried to defend it by saying they need to raise prices immediately so as to not “undermine market competition.” Suddenly they become righteous, kind and considerate; bottom line — they rake more profits because of the scheme.

It is plain to see that the oil companies, driven by greed, have been engaging in profiteering and abuse. Why isn’t the “daang matuwid” Aquino government stopping the cartel? Isn’t this “corruption,” theft in its purest?

Instead of stopping the hikes and regulating oil prices, government does its share of the robbery by continuing the imposition of 12% expanded value added tax on oil products, burdening the public with an addional P6-7 per liter pad on oil prices.

World monopoly manipulation and speculation
Oil companies claim they are increasing prices due to reflect increase in the world spot market or in the case of Philippines and Asia, the price of Dubai Crude. However, the simple fact is that the oil cartel does not buy oil in the “spot market,” and definieley not in “spot market” levels. They buy crude at cheaper prices through long term supply contracts with their mother companies.
The spot market is actually only 33% of the world oil market. The oil monopolies control 67% of the oil market and resources. The monopoly control of oil resources enable the big oil companies to manipulate supply and jack up prices artificially. For instance, a scheme the companies engage in is transfer pricing, padding the price for every stage of production from exploration to distribution.
The real reason for the rise of world market prices is not the lack of supply, but monopoly control and price speculation. Big banks and financial institutions are pushing the oil prices up and gambling on oil futures to squeeze profits out of superficial worries on the oil supply. The big financial institutions rake billions in profits while the majority of the people pay the price of expensive gasoline. Analysts say 60% of the price of oil today is due to speculation.
The deregulated oil industry and our dependence on foreign oil leave us vulnerable to the profiteering and manipulation being done by the world oil monopolies. Government, which is supposed to protect us from such abuse, stands idly by as the oil giants swindle the people.
Government must regulate pump prices and nationalize oil industry
Instead of token measures and press releases, government must take meaningful steps to stop the skyrocketing oil prices. It must immediately investigate the overpricing ang profiteering and prevent the oil companies from further increasing the pump prices. To provide immediate relief, the government can lift the EVAT to significantly reduce the pump prices.
The government must scrap the Oil Deregulation Law and look at long term solutions to the oil crisis. The Oil Deregulation Law has clearly failed to “level the competition” and push down oil prices as it promised more than a decade ago.
Meaningful steps should be taken to nationalize our oil industy and end our dependence on foreign oil monopolies for our oil supply. Concrete actions related to this should be studied such as centralized procurement; commodity swap and direct trade arrangements with oil producing countries; buffer fund to cushion effect of price fluctuation; buy back of Petron Corp.;  active state participation in oil refining; mechanisms for monitoring and reasonable pricing; and control of local oil sources and other possible energy sources.
Following recent statements, there is no sign that the Aquino government will take meaningful steps to address the oil crisis. Where is the “righteous” government of “change” and “reform,” sensitive to the needs of its people? It continues to adhere to the neoliberal dogma which turns a blind eye to the abuse of big foreign corporations, cheering them on as they screw up the Filipino people. In this case, the oil cartel and the financial institutions – sila ang tunay na boss.

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