Managing the Oil Crisis

Jun 18

We ought not to be completely helpless, however. What is so shocking about the current state of affairs is that our capacity to influence developments in oil has deteriorated from 25 years ago.  Then we had a proactive energy strategy, we had a government energy complex working to diversify our energy sources, and we had mechanisms to influence the domestic price of oil.  Today, in the era of oil deregulation, we are 100 per cent at the mercy of Chevron-Caltex, Shell, and Aramco, which controls Petron.  The OPEC countries that dominate the production of crude are often cast as the villains of the piece, yet the last few years have been years of record profits for the oil majors.  In just the first three months of this year the five largest US oil companies made a record $36 billion in profits, prompting the Democrats in Congress to push a bill to impose a 25 per cent tax on “unreasonable profits.” In the Philippines, the subsidiaries of the majors have been doing very well.  In 2007, Shell’s net profit rose 54 per cent over 2006, from P4.12 billion to P6.36 billion.  Petron’s net profits rose 6.3 per cent, from P6.02 billion to P6.4 billion.  Mind you, these are reported, not necessarily real profits, which are most likely higher, what with transfer pricing and all that.  The majors act as a cartel and pretty much set whatever price they agree on, with no government intervention and little government monitoring..  All our officials can do is to exercise what economists call “moral suasion,” but we still have to find an oil company that will allowed itself to be swayed by morality. In the US, it takes 4 to 6 weeks before a rise in the price of crude is reflected in the pump price.  Here in the Philippines, with the rapid succession of pump price rises, the truth is we no longer know how prices are being determined.  We don’t know if prices are being determined in response to actual past rises in crude prices or in anticipation of future price rises.  Non-transparency is the rule in the oil industry. Marcos was guilty of many crimes, but, as they say, we must...

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