January 5, 2008

Umbrella group Bagong Alyansang Makabayan today doubted the planned energy summit being called by President Gloria Macapagal Arroyo will be effective, saying that the summit is not keen on resolving the basic issues of high oil prices.

“The President has called for an energy summit to allegedly address the problem of high oil prices. Conspicuously absent in the agenda are issues we have long demanded. This raises serious questions on the intent of this so-called energy summit. It may just be another public relations ploy of the administration to appease the growing public clamor to stop oil price increases,” said Bayan secretary general Renato M. Reyes, Jr.

With the speculative price of oil breaching the $100 per barrel mark, Bayan has called for the immediate repeal of the Oil Deregulation Law to protect the people and the economy from unwarranted increases in domestic prices of petroleum products.

“The demands of the people are simple. Stop oil price hikes. Repeal the oil deregulation law. Scrap the value added tax on petroleum products. Unless the so-called energy summit addresses these issues, can we really expect anything from this summit? The organizers will simply be wasting their energy,” Reyes said.

Global oil price hikes in recent years, including the reported $100 oil, are mainly caused by speculation and not by the fundamentals of supply and demand, according to Bayan. But the national economy, which is heavily dependent on imported oil, and the consumers are forced to bear the brunt of exorbitant petroleum prices because of the government’s deregulation policy that strengthened the oil cartel.

Bayan noted that at least 90 percent of oil in the Philippines are traded through long-term supply contracts under the control of the Big Three (Petron, Shell, and Chevron) plus Total. This means that their prices should be much cheaper and stable and should not be affected by the daily fluctuations in the speculative futures market or even the spot market (i.e. Dubai crude spot price and the MOPS). Yet under deregulation, oil companies are allowed to regularly adjust pump prices supposedly to reflect the movement in global prices, as if local prices of petroleum products are directly and immediately affected by price fluctuations in the global oil markets.

As a result, pump prices have risen astronomically, Bayan said. The average retail price of all petroleum products have jumped by more than 576 percent since the downstream oil industry was first deregulated in April 1996. Bayan added that bulk of these increases in petroleum prices happened under the Arroyo regime as intense speculative attacks on global oil prices, the continued implementation of the Oil Deregulation Law, and the imposition of the value added tax (VAT) combined to push pump prices up to unprecedented levels. Around 39 to 42 percent of the increases in petroleum pump prices under deregulation occurred since January 2001, the start of the Arroyo regime’s term.

“The Arroyo government cannot circumvent core issues such as the deregulation of the oil industry and the operation of the oil cartel. The steep rise in oil prices dictate that the government takes serious steps in protecting the consumers from economic exploitation. Policies must be reviewed and reversed. The oil cartel should no longer be untouchables. These are the responses we need from the Arroyo government,” Reyes said.

Oil, because of its strategic importance to the economy and the people’s livelihood, is a highly political commodity, argued Bayan. The people started the new year with higher water and electricity bills and increases in prices of basic goods such as rice and pandesal. Bayan warned that the situation will definitely worsen in the coming months as fresh rounds of oil price hikes triggered by the $100 oil take its toll on prices, income and wages, and employment.

Protest actions are already being lined up the moment oil prices in the Philippines are increased.