With still so much uncertainty about the geopolitics of oil as a result of the recent combined missile and drone attacks on Saudi Arabia’s Abqaiq oil processing plant and Khurais oil field, the Philippine government would be remiss not to consider taking precautionary measures.
Being dependent on Saudi Arabia for most of our crude oil and processed petroleum products, any further destabilization – more so with an escalation of hostilities in the Middle East – could easily turn into a crisis affecting every single Filipino.
Whether it is an informal or formalized oil contingency task force that will tackle the threat will depend on developments in the Middle East within the next few weeks and until the repairs at the Abqaiq refinery will enable operations to return to normal.
For now, crude prices have only risen slightly from the time before the sabotage attacks, and are still significantly lower than the $85 per barrel crude price high of five years ago, or for that matter, the $100 per barrel averages during the previous five years.
Thanks to the increased production in US oil fields, a global market price upheaval that could have resulted from the tense situation in the Middle East has been averted. While the threat of an outbreak in hostilities is still around, anxiety levels have very much subsided.
Pricing mystery
On the local front, however, how local oil firms price their products at the pump still remains a mystery, even for the Department of Energy (DOE). It does not help that oil companies had to solicit a temporary restraining order from the courts to stop the DOE from requiring oil companies to unbundle their fuel prices.
The DOE had issued a circular in May this year in an apparent bid, according to an accompanying department statement, “to formulate proactive and appropriate policy initiatives for the benefit of consumers and the downstream oil industry” and to “support the Department of Energy-Department of Justice (DOE-DOJ) Task Force investigations on reported incidents of anticompetitive behavior.”
Petron Corp., Pilipinas Shell Petroleum Corp., the Philippine Institute of Petroleum, and the Independent Philippine Petroleum Companies Association, on behalf of its oil company members, filed separate motions with the courts to stop the DOE’s circular. The courts eventually issued the defining writs.
The DOE has deferred implementation of the circular, but the recent attack on Saudi Arabia’s oil facilities has prompted several of our lawmakers to ask for the DOE’s circular, supposedly to prevent oil companies from taking advantage of the unfolding crisis.
Transparency issue
Two decades after the passage of the downstream oil industry deregulation law, the DOE is still finding itself unable to answer complaints of price manipulation, much more collusion accusations among the major oil companies operating in the country.
Just how serious are the complaints that the DOE had even consulted with the Department of Justice and the Philippine Competition Commission when drafting the unbundling circular. Even until now that the TRO is still in effect, the DOE is trying to find answers.
Oil companies have come up with all sorts of arguments, from the circular as posing accounting problems, to being contradictory to the oil industry’s deregulation law, but have conveniently evaded responding to the public’s cry for transparency.
Perhaps, it is high time that the industry takes a more proactive approach to the accusations of collusion and price manipulation by working with the DOE to come up with credible answers, instead of mobilizing its army of lawyers and connections.
Long history
Earning trust and building one’s credibility is a problem that the local oil industry must learn to master. The perception of being manipulative and collusive is a liability that has been built through decades, starting during the years when the so-called Seven Sisters controlled world oil.
The use of oil as a source of power and profits continues to this day because it still is a commodity that is mined at a low cost, but sold at a premium to energy-hungry economies. These days, the distaste for fossil fuels being a cause for climate change and the disastrous effects on the world has added a new dimension to the distrust.
Coinciding with the recent UN climate summit, oil companies through the Oil and Gas Climate Initiative demonstrated how an investment of $100 million would fix emissions from fossil fuels. The initiative seemed ill-timed and too late in the face of the recent global climate strike that mobilized millions all over the world demanding for more drastic action from governments and companies to bring down emission levels of carbon dioxide and avert the environment’s further deterioration.
Still oil
The climate strike is expected to continue through the week in different parts of the world, while the UN General Assembly is in session. While the issue of climate change now headlines discussions involving dozens of world, leaders, the culpability of Iran in the attack on Saudi Arabia is still expected to rank high in the agenda.
Oil, after all, is still very much in the center of nations’ concerns, whether it be a fight for control of supply and distribution, or its diminished use to bring down carbon dioxide emissions and reduce global warming.
The world perhaps is at that tipping point in the environment activists’ efforts to create a swelling of awareness. The next, and more difficult, task will be to translate this into action where you and I will readily give up the conveniences of an oil-fueled modern living.
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