Oil companies are not the only ones that profit from crisis and disasters, both real and imagined. Traders and speculators in oil also profit from price spikes.
Hedging and speculation take place at the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE), formerly the International Petroleum Exchange (IPE). These are two commodity future markets where light sweet crude and Brent North Sea Crude are traded in New York and London, respectively. The NYMEX is a registered U.S. corporation. The IPE, based in London, was bought and absorbed by ICE, also a U.S. corporation, in 2001. Negotiated prices in these two exchanges are benchmarks for world oil prices.
While organized to protect companies from price fluctuations of necessary commodities, such as oil in this case, profit-taking, or buying oil in bulk when the price is low and selling it when the price is high, is common in these markets. In fact, speculation and profit-taking is so common that prices overheat, meaning prices increase to a point where there are no more buyers. This is the only reason for reductions in oil prices.
The Filipino people are more vulnerable to profiteering by oil companies and speculators because of the Oil Deregulation Law of 1998. Oil prices increased by 400 percent from 1996, before oil deregulation, to 2005. Below is a table of average oil prices supplied by Ibon Foundation.
The Arroyo government is kowtowing to oil companies and speculators by claiming that nothing can be done to mitigate the impact of oil price spikes.
In the immediate, it can scrap the Oil Deregulation Law and set the price of oil based on a study of world oil prices and a reasonable rate of profit for oil companies. The P11.8 billion combined profits of Petron Corp. and Pilipinas Shell in 2005, representing an 88 percent increase compared to 2004, is scandalous considering the hardships and poverty made worse by oil price increases.
In the medium-term, the government can buy the country’s oil needs in bulk to be able to negotiate for a better price and organize a local exchange where it can sell and distribute the oil products it purchases.
In the long-term, it can nationalize the oil industry, to include the extraction, refinery, allocation, and distribution of oil.
To be able to put these measures into place, the Filipino people must have a government that is truly sovereign, pro-people, democratic, transparent and accountable. (Bulatlat.com)