Oil Economics and National Sovereignty

11 November 2009

Middle of last year, 2008, world oil prices reached all-time highs at $126 + per barrel but by yearend, it crushed to $32.94 and even lower to $31.04 in February of this year. The reason given for this wild fluctuation of prices was the rapidly changing ratio of supply and demand. Prices hit the ceiling when demand, current and futures, exceeded actual supply, prompting U.S. President George W. Bush to demand that oil producing countries increase the supply of crude oil in the world market. The last quarter of last year, however, saw an unprecedented financial crisis hitting the United States and spreading like a contagion to the rest of rich capitalist countries. The resultant global economic slowdown leading to a recession lessened the demand for oil causing prices to tumble down to the 2004 level.

According to oil economists, the balance between supply and demand is hypersensitive to global events, hence the constant fluctuation in prices. The idea being presented is that the rise and fall of oil prices follows its own economic laws that are beyond human control. It has a life of its own, and all that we can do is to bow down to its imperious will, says the giant oil companies that have monopoly control over the supply of oil in the international market.

In the Philippines these last few days, oil inventories are fast disappearing in Metro Manila and across Luzon. And this has nothing to do with supply and demand. The world market has at present an abundant supply of oil. In the Philippines, Luzon in particular, there has not been a surge of demand for oil products. The truth is somewhere between the oil companies hiding or not releasing their current stocks, or they have stopped importing oil. This is without doubt a countermove to government’s Executive Order 839 putting a cap on pump prices in Metro Manila and Luzon. The executive order was an attempt of government to give partial relief to victims of the three typhoons that devastated the northern part of the country.

But unfortunately for the typhoons’ victims and the entire nation, oil companies don’t speak in moral language. They know only one language – the language of profit and superprofit regardless of circumstances, social or moral. They have absolute power to flood the streets of Manila with oil or make it dry. They would actually consider letting the economy collapse and cause millions of people to die of hunger unless they get their share of profit to the last centavo. They have absolutely no scruples. They have absolutely no fear of the government, its courts and its military. And to top it all, they feel offended and victimized by E.O. 839! For them it is a matter of justice and fairness, prompting them to turn off the oil faucet.

For most, if not all of us, this is beyond lunacy. But in the minds of the owners and managers of oil companies this is plain textbook reasoning. For them, governments are there to serve and protect their profits. That’s what Energy Secretary Angelo Reyes and every one of his predecessors, are there for. Just as for Catholics bearing children is a natural process that can’t be prevented without committing sin, for capitalists money capital bearing more money is a natural process that governments should never interfere. No calamity, no disaster, nothing on earth or from heaven should deprive capital of its due profit. Governments that do something that distracts or impedes capital from its natural behavior of procreating itself commit a capital sin, pardon the pun.

This development raises the question of nationalizing the oil industry. Oil is too sensitive, strategic and vital an industry to be left in the hands of private capitalists, not to mention foreign. It is the state’s primordial duty to protect the interests and well-being of the citizens. But allowing private oil companies to control the very lifeblood of the national economy is totally contrary to this mandate. The much maligned President Marcos was right when he put up Petron as a state oil company that could import, process, refine and distribute oil products (together with PNOC). With a state oil company, foreign oil companies are forced to toe the line, or else they would end up without customers. Alas, the government under President Fidel Ramos sold it to foreign investors and let foreign managers run it. Now, it’s part of the Big 3 that have the power to bring the Filipino nation and its people to their knees.

But this is a very rare opportunity for the Arroyo government to redeem itself in eyes of the Filipino people. For the crime of economic sabotage, the government can take over control and operation of the oil companies. It is within the powers of the state to do this – for the survival and development of the nation. This is nationalism in its most concrete real form. The Filipino people may even thank Gloria Arroyo, even beg her to extend her term and continue to serve as the nation’s leader, if she would take up the challenge.