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 Press statement / July 16, 2008
Reference: Mr Sonny Africa (IBON research head)
IBON Foundation, Inc. is an independent development institution established in 1978 that provides research, education, publications, information work and advocacy support on socioeconomic issues.