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IBON Press statement / July 16, 2008
Reference: Mr Sonny Africa (IBON research head)
GLOBAL OIL GIANTS AND LOCAL BIG 3 PROFITING FROM PRICES BLOATED BY
SPECULATION
World oil prices are bloated by speculation in oil markets, and local
firms Petron, Shell, and Chevron Philippines which are domestic agents of
the global oil monopolies are passing on this overpricing to consumers.
This has resulted in record oil industry profits at the expense of
hyper-inflation.
It is hard to quantify how much of the recent oil price increases are due
to speculation but the steepness of increases in the past year in the
absence of correspondingly large shifts in supply and demand fundamentals
suggest that this is significant. A 2006 study by the United States Senate
Permanent Subcommittee on Investigations for instance had already
estimated that as much as 30% or more of the prevailing crude price at the
time was due to speculation- driven purchases. Applying this to how the
cost of crude oil accounts for around 75% of the local pump price of fuel
(based on the DOE estimate of crude/product costs in diesel and gasoline
prices of the oil industry and importers) implies that over 20% of local
pump prices are due to speculation- driven overpricing.
The monopoly oil transnationals already rake in billions of super-profits
from inflating the price of their oil. This monopoly pricing has been
further bloated since last year by increasing speculation in world oil
market. The deepening financial and economic crisis especially since
mid-2007 has seen big financial investors, especially oil firms recycling
their accumulating profits, shifting money into commodity markets
particularly in oil, food and gold.
It is likely that the current bloating of oil prices due to speculation
today will be even more than estimated by the 2006 US Senate report
inasmuch as speculative investments in energy commodities today are double
the US$100-150 billion levels around the time the report was made. This
has already been acknowledged by among others even the Saudi Arabian and
German governments, US government officials and the International Monetary
Fund (IMF).
Thus, any effort to address the global problem of high oil prices has to
squarely address the monopoly domination and price manipulation of the big
oil corporations. The energy industry is too critical and strategic to be
left in the hand of private profit-maximizing interests. The ease with
which local oil firms can pass on this manipulated increase in global oil
prices on top of built-in overpricing underscores the need for genuine
regulation of the domestic oil industry to, at the very least, rein in
such excessive profiteering at the people’s expense. (end)
IBON Foundation, Inc. is an independent development institution
established in 1978 that provides research, education, publications,
information work and advocacy support on socioeconomic issues.
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