For the nth time, peeved over fuel prices

The Philippines is continually in a fuel crisis.

The recent social and political disturbances in Northern Africa and around the Arabian Gulf has only made things worse. The situation has deteriorated not because there is a shortage of supply, or an increase in demand, as “economists” would sure to allude to. Prices have skyrocketed to its present levels because oil, from the producing countries to the distributors, say that petroleum prices should increase because of the troubles in Libya and the Gulf. Prices have risen because speculators in oil trading and in the global stock markets, like to take advantage of the troubles and make humongous profits. By feeding the illusion that indeed prices have to rise on account of the social and political troubles in Africa and the Gulf, the price of their stock would likewise rise.

When the stock prices plateau or peak, these speculators would divest themselves of these. After the troubles simmer down, stock prices would also fall to their more natural level, where the same speculators would buy them back, and hope for another crisis in a major oil-producing region to resume the cycle. As things go, because of the speculation, it is expected that fuel prices will continue rising, irrespective of supply and demand issues.

Come to think of it, oil trading is one of the few industries where profits are assured. When fuel prices do rise, whether artificially or for real, petroleum companies would simply pass on the increase to the consumers. For countries that subsidize petroleum products, government takes care of some of the cost. In any case, the oil companies do not lose. It has long been the suspicion of many that price adjustments in petroleum products have always been done to ensure bigger profits for these companies.

But the Philippine government, like most other governments in this environmentally-devastated planet, is hostage to the oil and energy industry. Our government is rather inutile dealing with the astuteness of oligarchic petroleum companies, whether it be during the time when the industry was regulated, or after it was de-regulated.

Government is ever afraid that a stand-off with the oil companies would result in a fuel and energy shortage.

The effects of a fuel shortage would be catastrophic to the economy, and before it happens, government will give in and allow the petroleum companies to have their way. In the Philippines, the industry is dominated by three companies, Petron, Shell andCaltex.

Fuel prices do have to be reduced, if consumer groups are to be believed, as petroleum products are overpriced by as much as P8 per liter. This claim is totally believable, since the big three in the Philippine fuel scene, Petron, Shell and Caltex, are perennially included in the top earners in the country. Where else do these earnings come from but from their sales of overpriced fuel?

True, being businesses, oil companies are expected to profit, but what these three are earning is just too much.

Since the industry has been deregulated, prices are supposedly dictated by market forces, but we have not seen any competition at all between the three. Rather, what we have seen is cooperation, a cartel, where they raise prices together. Pundits believe that they do it too early and too often. They even roll back prices at the same time. The same pundits say these rollbacks are again too little too late.

Some form of regulation is needed, since the effect of fuel prices is far ranging, reaching out to every other industry and enterprise. If needed, the oil deregulation law should be revised to ensure more reasonable fuel pricing. It seems too much to hope that Congress shall enact laws that will mitigate the people’s suffering, at least on the issue of fuel prices.

The penchant of the oil companies to maximize profits may be seen in the difference in pump prices in Baguio and La Union or Manila. Prices in Baguio are higher by as much as P10 than Manila. Logically, this is explained by the cost of transporting the product, that cost being passed on to consumers as the price difference. However, if we look at other franchises, it boggles the mind that oil companies charge us for product transport when others do not. Cocacola products, for instance, costs the same here and Manila wholesale, despite the reality that the products are also transported. Jollibee sells all its products all over the country at the same prices, even if these are also transported. Wholesale prices for many other products are mostly the same nationwide.

But fuel prices are different. The consumer has to pay more for the transport of fuel from the oil depots. The farther, the more expensive. Where is the logic in that? It simply means that at the disadvantage of Baguio consumers, the oil companies are earning as much as P10 additional for every liter. If that price difference is the cost of transportation, it boggles the mind that it costs that much to transport a liter from Poro Point to Baguio.

If only on this point government will act so that pump prices will be the same nationwide, it will be an incalculable reprieve for our crisis-ridden people.


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