ANGAS! March 2011: Oppose rampant oil price hikes by Alay Sining

Poor Filipinos bear burden of rising prices

University Wide Chapter VOL.3

Oppose rampant oil price hikes

he story of the oil industry is a sobering study on the shortcomings of government, the failures of the so-called “free market” system, and the predatory nature of the global economy.

In the Philippines, no less than nine oil price hikes have taken effect since January. The problem is that oil is a basic commodity which the public has no choice but to buy, no matter the cost. Because gasoline is a crucial cost factor in transportation, the price hikes in the oil sector have set off a chain reaction across the market — the price of other goods and services are being driven up at an inflation rate that even the Aquino administration concedes is alarming. Nine oil price hikes over less than three months. That amounts to: Product

Cost increase since Jan.1 Cost as of March 15

Diesel

P6.75 / liter

P45.85

Gasoline

P6 / liter

P54.50

Kerosene

P6.50 / liter

P54

LPG

P2.50 / liter

P755.70

Debunking lies In the Philippines, the oil industry is monopolized by three companies: Petron, Pilipinas Shell, and Chevron Philippines (Caltex). Over the years, every possible excuse for oil price hikes has been trotted out by these corporations — they are operating at a loss, there is a shortage in supply, they are tied to caprices of the global oil market. The figures, however, contradict their deceptions. Oil price hikes are necessary because companies are operating at a loss. In a 2009 list of the top corporations in the Philippines, Petron ranked 1st, Pilipinas Shell ranked 2nd, and Chevron Philippines (Caltex) ranked 5th. Petron reported gross revenues of P268.8 billion in 2009, a profit increase of P4.3 billion from the previous year. Petron reported that their profits rose by P5.4 billion in 2010, a 59% increase. The unrest in the Middle East is disrupting the global supply of oil, and shortage makes local price hikes inevitable. The political turmoil in the Middle East-North African region is centered today in Libya, a country which accounts for less than 2 percent of the global oil output. The Middle East accounts for 81 percent of the Philippines’ crude oil imports, mostly from Saudi Arabia, the United Arab Emirates, Qatar, Oman and Iran. Local oil companies always maintain an inventory or stock supply good for 30 to 55 days. This means companies today, who bought their oil a month ago, should peg their prices on purchasing costs instead of exploiting the current unrest to jack up their profits. At the present rate of consumption, global oil reserves are enough to last for the next 42 years. The deregulation of oil is a good thing, because it encourages free market competition and lower prices. The price of oil has more than tripled over the past decade, The cost of premium oil rose from P16.56 per liter in 2001 to P58.46 per liter in 2011. The “big three” — Petron, Shell, and Chevron — continue to dominate over 90% of the local oil industry. Oil is overpriced by at least P7.50 per liter. The facts clearly show that each oil price hike is an act of exploitation. Oil companies are increasing the price of their product, not because of any real necessity, but out of simple greed. Oil is treated merely as a business, after all, and public welfare is irrelevant; the companies simply want to increase their profit margin. Oil and the government It is the role of government to provide some regulation to prevent abuse of the “free” market system, such as what the oil sector is inflicting upon the people. But the current Aquino administration, like its predecessors, is crippled by its own laws. Consider: as prices spiral upwards, the government’s grand response is a promise to monitor the hikes. It is a devastating admission of weakness on the part of the government. The public welfare is at stake, the cost of a basic commodity is spiraling out of control, and all they can do is “monitor” the situation. The actual solution, regulation, has been repeatedly discarded and discredited by every administration, ever since the passage of the Oil Deregulation Law in 1998. Moreover, the government has also implemented another measure that contributes greatly to the overpricing

The media reported that the country’s inflation rate reached 3.5 percent in January and 4.1 percent in February, higher than expected, and that “as price hikes in food and energy items [are] evident… Malacañang has admitted it is worried.” Product/ Service

Price in pesos Price in pesos (June 2010) (February 2011)

Food items(per kilo) NFA rice 28.00 32.00 Galunggong 100.00 140.00 Onion 40.00 220.00 Cooking oil in 750 mL 40.00 70.00 Utilities Manila Water (basic charge) 23.08 26.54 Meralco (distribution for customers 2.19 2.39 using more than 400 kwh/month) SLEX, class 1 or private vehicles 22.00 79.00 SLEX, class 2 or public utility vehicles 43.00 159.00 Transportation Jeep (minimum) 7.00 8.00 Taxi (flagdown / for every 300 meters) 30.00/2.50 40.00/3.50 Eight months into the term of President Benigno Aquino III, and things are definitely changing — for the worse. The news of rising prices is unwelcome in a country where a staggering 70 percent of the population, or roughly 64.6 million Filipinos, live on only P104 or less per day. That pitiful amount — in fact, even the minimum wage of P404 a day in the National Capital Region — is not enough for a stable and decent life, especially when the cost of basic necessities like food, transport, shelter, education, and health are factored in.

Our stand on this matter is simple. We oppose these hikes and condemn the debilitating effect of the rising cost of living on the Filipino people. In the short-term, we call for an immediate rollback; in the long-term, we support the nationalization of the industry, the repeal of the Oil Deregulation Law (RA 8472), and exploration of alternative sources of energy.

n the past months, prices of basic commodities and services soared like never before. The costs of goods and services have dramatically increased compared to last year, as illustrated by the incredible spike of almost 350 percent in the price of a kilo of onion.

It is a prevailing myth that the price hikes are inevitable. But in truth, if the government would only show some political willpower, the prices of basic goods and services can be kept at levels that meet the needs of the people. Sining Iglap (Liwasang Bonifacio)

of oil: The E-VAT, or the 12 percent Expanded Value-Added Tax on consumer goods and services, has forced the public to shell out even more money at the pump. However, while removing the VAT would provide instant relief, bringing down prices by as much as P5 immediately, it would not solve the underlying problem: the unchecked power of oil cartels as the sole arbiters of prices in the industry. A more long-term solution would be the repeal of the ODL. After all, the premise behind the ODL was to lower the prices of oil through increased free competition. In practice, as we have seen, this did not happen. In fact, as predicted by groups opposing the ODL when it was first implemented some 13 years ago, the opposite took place — without regulation, oil cartels were given free rein to arbitrarily hike their prices, over and over again, with only minimal rollbacks. Challenging neoliberalism The local situation only reflects the skewed state of the global oil industry, where prices spike upwards at an illogical rate, for the most volatile and arbitrary of reasons. Prices are driven up, not by the simple logic of supply and demand, but by invented mechanisms of the neoliberal system, which prizes the expansion of “free markets” and liberal economic policies such as deregulation and privatization, heedless of its impact on the public sector. One such mechanism is speculation. Oil companies often trade in “futures,” based on predictions of future scarcity and the subsequent higher price of oil. The problem is that while prices increase, the real value of oil as a commodity does not. Up to 60 percent of global oil prices are estimated to be “pure speculation.” Another way by which monopoly control of the market can lead to overpricing is the creation of “aggravated scarcity,” by which the global abundance of crude oil is overshadowed by refining processes which are intended to significantly limit the production of petroleum products. This March, it is time to take a stand. If the inutile government will not protect the people from the exploitation of giant oil corporations, then it falls to the masses to struggle to uphold their own rights and welfare. In the face of certain repression by this administration, which has chosen to justify oil price hikes instead of taking measures to condemn and curtail them, the Filipino people — millions of whom remain mired in poverty, ill-equipped to bear the brunt of rising costs — must take matters into their own hands.

Join the March 18 caravan against oil price hikes! Support the March 31 National People’s Protest against oil price hikes!

State abandonment The spate of price increases can be traced to a primary cornerstone in the Aquino administration’s economic policies: Public-Private Partnerships, which allows private companies to take control of public services supposedly subsidized or provided by the government. However, the government’s voluntary transfer of responsibility for its duties to the private sector renders public services vulnerable to overpricing and commercialization. In the food sector, for instance, the Department of Trade and Industry (DTI) is tasked with ensuring that the prices of food as a basic commodity does not go beyond the people’s purchasing capacity. Yet the DTI’s solution is to set up price billboards in wet markets, regularly inspect the weighing scales and price tags, and create local monitoring teams in municipalities. The DTI’s response focuses on price monitoring and price checking, which does little towards the reduction of prices of basic goods. Such measures are a poor substitute for concrete measures to address the rising cost of food. Unchecked by government, the rampant fare, tuition, and other price hikes are evidence that private corporations are getting good value for their investment — at the expense of the masses of Filipinos who continue to live in poverty. Uneven trade Meanwhile, even as it grants private corporations the freedom to raise prices without regulation or intervention, the government refuses to grant the P125 across the board wage increase demanded by workers. Instead, the government increased the minimum wage by P22, a token gesture that barely scratches the surface of the workers’ wage problems. Job creation is not a priority of this administration, either. The latest figures from the National Statistics Office shows that more Filipinos are jobless under Aquino. Nearly 100 thousand more Filipinos were unemployed as of January 2011, compared to the same period last year. Even education, a public service which is supposedly one way to climb out of poverty, is becoming out of reach. The cost of tertiary education also climbed by 15 percent from last year, according to the National Union of Students of the Philippines, not counting the various miscellaneous fees imposed by schools. And the services subsidized by government as a way to alleviate the rising cost of living, such as cheap and efficient public transportation, are also in peril. The private companies controlling the LRT and MRT lines are pushing for fare hikes, which the Aquino administration has approved. If implemented, this would be a further burden on the people, although public outrage has led to an indefinite postponement by the government on the implementation of fare hikes. The people, who remain at the losing end of every price hike, can and should hold the government accountable. Genuine change entails a system that ensures more jobs and fair wages, and a government that protects, not the interests of private corporations, but the welfare of its people. When the government ceases to protect the people from exploitative private interests, there is every reason for widespread outrage and massive protest actions.

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