The recent and unabated spikes in the price of gasoline and other petroleum products characterizes and manifests the decades-old national exploitation by the oil cartel and the inutile and subservient character of the present Philippine government to the whims and caprices of foreign and local profiteers.

Consider these:

(1) Oil companies are making a killing, reaping billions in profit every year
The pump price of diesel has already increased by P6.75 per liter since January; kerosene, P6.50, and gasoline, P6. Petron posted a 59% increase in profits, or P5.4 billion, for the first nine months of last year. In 2009, the same oil company posted a profit of P4.3 billion. Pilipinas Shell posted a P7.6 billion profit for the first nine months of 2009. It posted P5.07 billion in profit in 2008, the year when oil prices jumped to its highest in recent history. In the Top 1,000 corporations in the Philippines in 2009, Petron placed first with gross revenues of P288.8 billion in 2008. Pilipinas Shell was second, and Chevron Philippines (Caltex) was fifth.

(2) There is no shortage in supply
None of our oil comes from Libya, and yet oil companies invoke the Libyan unrest as if it’s causing a major disruption in the global supply of oil to justify price hikes in the Philippines. Libya accounts for less than 2 percent of global oil output and yet oil companies are invoking the unrest to jack oil prices in the same levels as in 2008. Saudi Arabia and other OPEC countries have repeatedly stated that whatever production shortfall is happening in Libya is being compensated by increased output in OPEC countries. Clearly, there is no real shortage.

The oil price hikes allegedly due to the unrest in North Africa and the Middle East is clearly another product of speculation and wanton profiteering. Rep. Neri Colmenares of Bayan Muna said that the crisis in the Middle East is such that “it has become a cash cow for the Big Three.”

While a reasonable profit and return of investment is expected from oil companies, their greed should not be satisfied at the cost of exploiting the Filipino people. Clearly, the exploitation of oil companies has been exorbitant and shameless.

(3) Shameless overpricing by as much as P7.50 per liter
Arnold Padilla of BAYAN claims that “from 2008 to January this year, oil firms have implemented price hikes that were bigger than what changes in global prices and foreign exchange warrant. Similarly, they also implemented smaller rollbacks. The net result is an overpricing of around P7.50 per liter.” Oil companies squeeze an estimated P370 million everyday in extra profits from overpricing.

Indeed, oil companies have always been slow in rolling back prices when the cost of petroleum in the world market drops but are always quick to hike when the cost of petroleum in the world market increases. The Oil Deregulation Law has only given oil companies the right to manipulate oil prices that leads to arbitrary pricing and other illicit schemes to unjustly profit.

(4) The myth of deregulation
Speaking of the Oil Deregulation Law, let us delve into the topic of deregulation, which has always been a battlecry policy of neoliberal economics, but in reality and in our experience, has only strengthened the oil cartel in the country.

Oil is a socially sensitive commodity. It affects the price of every other basic commodity that the people needs, and many public utilities from electricity to transportation. Its demand is inelastic–people need it and will buy the commodity regardless of what price it commands. It is not and should not be treated like any other commodity like branded clothes or fastfood burgers that may be left to “free market” forces. Clearly, the government has all the reasons, for the sake of national interest and for the public good and welfare, to regulate and control the cost of petroleum products.

Also, fair prices under a regime of deregulation is impossible with the presence of an oil cartel which has a global monopoly of procurement, production (refining) and retail. The oil cartel comprising of only three companies control as much as 90% of the local market in the Philippines. There is no hope for fair prices under oil deregulation. Indeed, there can be no competition in an industry that is under the control of a cartel, from production to distribution.

(5) Oil price hikes amidst widespread poverty
The basic masses are the most vulnerable whenever the price of petroleum products jacks up–from the jeepney drivers who use fuel to run their jeepneys, to the small fishermen who use fuel to run their pump boats and bancas, to the housewives who use cooking gas to prepare our everyday meals. They bear the brunt of the burden with all the hikes, with minimum wage stunted at P404 pesos, and the average cost of living by a family of six estimated at around P1,000, the masses are hard pressed to cope up with the present economic and political system that has continued to push them to the margins and threshold of survival.

Government statistics show that a third of the population are poor (and by the government’s definition of poor, a Filipino is poor if he lives on less than P46 a day, that means if millions of Filipinos live on even just P47 a day, the government doesn’t count them as poor, which effectively undercuts the country’s still-alarming poverty statistics).

(6) Our alternative
1. Remove the 12 percent VAT on petroleum products, control the price of oil in the local market, compel oil companies to open their books
To provide immediate relief to Filipinos, the government must exercise is vast sovereign police power to control the price of petroleum products. As I’ve previously mentioned, petroleum is not an ordinary commodity that should be left to “free market” forces (read manipulation by private profiteers).

Removing the 12 percent VAT on petroleum products can lower the price of oil products by as much as P5 per liter. This is a measure the government must seriously consider in exercising its responsibility to protect the welfare of the people. It’s not as if the people will suffer any worse because after all, more than half of the people’s money don’t go into spending for social services but to foreign and local debt servicing anyway.

Compelling oil companies to open their books and allow for government audit of their inventories will also ensure transparency in pricing by exposing the illicit overpricing of the oil cartel in the Philippines.

2. Nationalize the oil industry. Repeal the Oil Deregulation law. Enact House Bill 3455
Kabataan Party-List, along with other progressive party-list lawmakers have filed House Bill 3455 which would repeal the Oil Deregulation Law and enact a law regulating the downstream oil industry in order to stabilize oil prices, centralize the procurement of oil and bring back government participation in the oil industry through the buy-back of Petron.

The government, through the centralization of the procurement of oil, for example, can “expand potential oil sources and shop for the cheapest available oil. Bilateral agreements with state-owned companies from oil exporting countries may be pursued under special arrangements, including commodity swaps, which can provide the country considerable discounts.”

With regard to fears of higher taxes due to the necessity of a subsidized buffer fund such as the defunct Oil Price Stabilization Fund (OPSF), Arnold Padilla of BAYAN has also asserted that “while a buffer fund will be needed in a regime of regulated oil prices, such fund is entirely different from the flawed OPSF. It must be emphasized that it is possible to establish a buffer fund without passing on the burden to the taxpayers and consumers. One way of doing it is for the buffer fund to be financed by government earnings and savings from its increased participation in a regulated downstream oil industry.” Rep. Rafael Mariano of Anakpawis also added that, “Uncollected taxes from the oil companies, such as the P21 billion in unpaid custom duties of Shell, can also serve as seed money for the buffer fund.”

The CPP points out, however, in its statement directed against the present Philippine government under President Noynoy Aquino, and to which I agree, “The people’s demand to regulate oil prices does not call for subsidizing the profits of oil companies.”

3. Tap natural sources of oil, develop alternative sources of energy
Rep. Teddy Casiño of Bayan Muna has said that, “the country’s proven oil reserves were approximately at least 138M barrels, to include the 30-40M barrels in the Malampaya oil fields, 10-20M barrels in the Galoc oil fields, and 158M barrels in the West Linapacan A and B oil fields all in Palawan. This does not include potential oil reserves in Mindanao, Mindoro, the Visayan Sea and the Spratlys.”

We also have a wealth of other alternative energy sources, from solar to wind to geothermal, and yet these sources remain largely untapped because as Rep. Teddy Casiño has said, “foreign corporations are not interested in developing the oil and energy industry in the Philippines because it would compete with their own operations abroad.” And despite constant pronouncements by the government that we should tap into alternative sources of energy, no serious and concrete steps have been undertaken to ensure the development of the national energy sector. It has always been just press releases to distract the people from the illicit acts of the oil cartel.

(7) Conclusion
The unabated increases in the price of petroleum products is not something that we should simply surrender to as if it’s such a natural world market and free market phenomenon. The problem clearly traces its roots in the monopolistic control of the oil cartel in the global oil industry and the subservient attitude of the government to the whims and caprices of foreign profiteers. Granted such, our response should not be limited to habit-changing or habit-formation (like taking public transportation instead of taking a car, or walking instead of commuting, etc)–this helps, but is largely off-tangent from the real problem. Our action must collectively be directed to the roots of the crisis. We have to demand that the government enforce comprehensive and long-term solutions to the perennial exploitation by the oil cartel by putting an end to its monopoly through the repeal of the Oil Deregulation Law, by nationalizing the country’s oil industry and by developing alternative sources of energy.

Further reading:
* Overpricing amid speculative oil price spikes, not supply, is more urgent concern
* Speculation: A Closer Look at Price Hikes
* Aquino regime interested more in assuring oil profits than people’s welfare–CPP
* Comprehensive, long-term solution to oil crisis: Casiño pushes omnibus oil regulation bill mandating price controls, Petron buy-back and centralized oil procurement
* Desperate for oil while sitting on an oil field. Casiño says gov’t should wrest control of local oil and gas reserves from foreign companies
* Philippines 300k fishers asked to join fish strike vs. oil price hikes
* No hope for fair prices under oil deregulation
* Oil products still overpriced by over P8 per liter -BAYAN
* Thoughts on the price hikes
* Palace told: open books of oil firms