Oil Price Watch

[anonemus]

Continuation...

a.2 Developing Alternative

In the face of the alarming oil price hike that threatens the survival of ordinary Filipino people, a number of stakeholders call for alternative solutions: 1) amendment of the Oil Deregulation Law, 2) scrap/repeal the law, 3) removal of 12% vat on oil, 4) seek alternative sources of energy, and 5) engage in country-to-country oil agreement.

a.3 Options Analysis

1. Amendment of the Deregulation Law

As the public continues to hurt from surging oil prices, many policy makers call to re-examine the Downstream Oil Industry Deregulation Act of 1998. One of whom, is Ilocos Sur Rep. Eric Singson who has sought several amendments in the said law to ensure transparency in the pricing of oil products and encourage greater competition in the retail industry, which has been under the influence of giant oil companies. He cited the need to amend Sections 14 and 15 of RA 8479 to strengthen the powers of the Department of Energy (DOE) so it can effectively carry out its mandate to inform and protect the public from illicit practices in the oil industry and to provide more financial assistance for the establishment and operation of gasoline stations, which will encourage investment and fair competition (Malacanang 2005).

2. Scrap/Repeal the Oil Deregulation Law

To many, amending the law is not enough to rectify the skyrocketing prices of oil and oil-based products; they demand for the repeal, instead. A lawmaker from the Lower House, Cagayan de Oro City Rep. Rufus Rodriguez filed House Bill 4262 aiming to repeal Republic Act No. 8479, arguing that instead of fostering a competitive market, the law has only strengthened the oil cartel in the country and brought the oil prices up. The bill also seeks to re-establish the Oil Price Stabilization Fund. He articulated that dominant oil companies still dictate the price because even new oil industry players get their supply from the giants (Sisante 2008).

Militant groups and other non-government organizations have staged rallies and strikes all over the country in opposition of the deregulation policy. Kilusang Mayo Uno (KMU), one of the country's prominent labor groups, contested that cartelization still exists amidst deregulation. In its recent statement, KMU articulated that with recent Dubai oil prices pegged at $97 per barrel (as of 3rd week of September), local price of diesel is at P49/liter; while when Dubai crude was at $97/liter on Nov. 6, 2007, diesel in the Philippines was sold only at P37.95/liter, or P11.05/liter lower than the present rates (GMANews.TV 2008).

3. Removal of 12% VAT on oil

Senator Mar Roxas said that government must heed calls to remove the 12% value-added tax (VAT) on oil and oil products as prices continue to go up despite the lowering of oil prices in the world market. Roxas had filed Senate Bill No. 1962. However, in her eighth State of the Nation Address (SONA), President Arroyo, stated that it will be the poor who will suffer the most from the removal of VAT on oil and electricity as this will mean the loss of P80 billion in programs being funded by her tax reform (Arroyo 2008).

4. Alternative sources of energy.

While many have engaged themselves in the long-running debate about amendment vs. repeal of the law, a number of stakeholders argue that Philippine government must, instead, focus on alternative sources of energy to rectify the heavy dependence on imported oil. Senator Juan Miguel Zubiri, now considered "Father of the Philippine Biofuels Bill," has hyped biofuel as the miracle product which can lower oil prices. But more and more scientists are worried that focusing on biofuels could jeopardize food production.

The Philippine LaRouche Society, an increasingly emerging think tank organization in the country, says that biofuel advocacy is a losing proposition as it competes with food production for human consumption. The organization calls, instead, for the revival of the Bataan Nuclear Power Plant (BNPP) as soon as possible to provide the population with a cheap, reliable, and continuous source of power to subsequently free the people from dependence on oil. The organization further articulates that since that will require huge financial requirements, the Philippine government must, therefore, declare a moratorium on foreign debt payments-since much of which are onerous and merely product of "bankers arithmetic" (Billington 2005).

5. Country-to-country oil agreement

The Philippine LaRouche Society has long been proposing to the government to initiate immediate steps to establish bilateral contract agreements with oil-producing countries of not less than 12 months' government scheduled deliveries at reasonable, fixed prices. Government can also enter into commodity-swap agreements with oil-producing countries.

As a member of the United Nations and other intergovernmental associations like APEC and WTO, the Philippine government should join the growing worldwide call for a fair and honest oil trading by de-listing oil as a commodity traded in the futures market.

[anonemus]

More here...

a.4 Deciding the Best and Most Feasible Option

It must be known to all the Filipino people that oil deregulation, as a policy, has failed to foster a truly competitive market towards fair prices and adequate, continuous supply of environmentally-clean and high quality petroleum products. Proposed solution # 2 (scrap/repeal the Oil Deregulation Law) is therefore a better option. But repealing the Deregulation Law is not the ultimate answer to the rise in oil prices. Even if the law is repealed, the Philippines will still be subjected to the same factors-a rise in oil prices in the global market.

Proposed solution # 5 (country-to-country oil agreement) can address the issue of the oil crisis at the international level. How about the efforts to solve the crisis at the national level?

The Philippine government must revive the Bataan Nuclear Power Plant to provide the population with a cheap, reliable, and continuous source of power to subsequently free the people from dependence on oil. As proposed, government must direct enough funds, instead for debt servicing, towards the revival and upgrade of BNPP. Removal of the entire E-VAT, not only on oil, must also be taken into consideration to ease the pain of the Filipino people. By moratorium, government doesn't have to extract a pound of flesh out of every Filipino to have the means to fund its programs.

B. Why seemingly "better" options are not adopted? The Peculiarities of the Philippine Policy System

From the standpoint of the present administration, amending RA 8479 seems to be difficult to adopt because re-regulating the oil industry would mean subsidizing oil prices-something like OPSF. To many, this does not work in an era of rising crude prices because it would entail government resources. This is where debt moratorium comes in as an effective fiscal strategy. But moratorium, to many skeptics, is unwise because they fear the blackmail or retaliation of the multinational creditors. Our leaders must learn how then President Nestor Kirchner of Argentina defied the predatory financial institutions, averring that "There's life after the IMF."

On the other hand, many leaders deem country-to-country oil agreement impossible to implement as the giant oil companies have still strong influence on the policy-making process in the country. On the part of the oil companies, it will be a huge loss if government will assert its power to have a bilateral agreement with any of the oil-producing country. Also, many leaders consider the Philippines as a small nation with no voice in the international assembly. But it is a matter of having "big balls," to put it in a figurative language. After all, they are the leaders and are mandated by the Constitution to protect and promote the general welfare.

Another peculiarity of the Philippine policy system is the negative perception towards nuclear energy. BNPP has been stigmatized as being environmentally dangerous and as being associated with "corruption." The fact of the matter is, the technology has already evolved and been modernized. The Philippine government spent $2.3 billion to build BNPP without generating a kilowatt of electricity. It is high time to revisit the old strategy to finally free the country from dependence on imported oil.

It is worth mentioning that the International Atomic Energy Agency inspected the power plant in Bataan early this year and reported that this could be rehabilitated, in full compliance with high international safety environment standards, in at least five years at a cost of $800 million (Burgonio 2008). The Philippine LaRouche Society emphasizes the importance of declaring debt moratorium as a fiscal strategy to start the rehabilitation. The organization argues that the Philippines is servicing the debt over US $10 billion per year, which is more than enough to start the full operation of BNPP (PLS 2008).

[Monseratto]

Senator Mar Roxas said that government must heed calls to remove the 12% value-added tax (VAT) on oil and oil products as prices continue to go up despite the lowering of oil prices in the world market. Roxas had filed Senate Bill No. 1962. However, in her eighth State of the Nation Address (SONA), President Arroyo, stated that it will be the poor who will suffer the most from the removal of VAT on oil and electricity as this will mean the loss of P80 billion in programs being funded by her tax reform (Arroyo 2008).

Natatawa lang ako dito. When these people were sitting on the other side, ang dali mag suggest ng ano ano dapat gawain. Now that they are in, they realize everything is not that simple. PNoy himself already outright rejected this idea. Any idea of goverment repealing the deregulation law and subsidizing (Oil Price Stabilization Fund) poor juan's petrol is out of the question. In other words, poor juan's goverment cannot afford it...

And the sprinkling of data from IBON Foundation makes the article more doubtful.

[safeorigin]

yes... and they've concluded scrapping the oil deregulation law would do good...

amazing

[shadow]

this guy gets it

it's not coz he's taking my side

he really gets it

yeah safeorigin got it alright....




















even the way you post. he got it! I'm getting confused kung magkasunod ang post niyo akala ko ikaw pa rn si safeorigin na pala...

[anonemus]

Natatawa lang ako dito. When these people were sitting on the other side, ang dali mag suggest ng ano ano dapat gawain. Now that they are in, they realize everything is not that simple. PNoy himself already outright rejected this idea. Any idea of goverment repealing the deregulation law and subsidizing (Oil Price Stabilization Fund) poor juan's petrol is out of the question. In other words, poor juan's goverment cannot afford it...

And the sprinkling of data from IBON Foundation makes the article more doubtful.

I guess back then Mar was taking a popular position as he was eyeing to be the next President. Ngayon tahimik na.

About the OPSF, baka one source of fund for this is the Malampaya Natural Gas Project in Palawan. It is estimated to contain 3 trillion cubic feet of gas and 40 million barrels of recoverable oil reserves. Kaya na sana isupply yung oil requirement ng Pinas which is estimated at 313,000 bbl/day (2009 est.) while we develop alt source of energy (like autoLPG for cars).

Problema lang during FVR's time, hhe agreed to Shell and Chevron taking majority control (90%) of this project. Si GMA naman almost sold PNOC's 10% share to other investors (I guess gusto kumita sa transaction).

Buti na lang PNoy wants more control of Malampaya.

http://www.abs-cbnnews.com/business/...ampaya-project

It was during FVR's time that the deregulation of the the oil industry was made. Petron was privatized. Tapos the Malampaya project was even given the Shell and Chevron.

Bakit? Its the free market capitalism mode of development. Deregulate and privatize para daw may efficiency.

Sino kumita at kumikita ngayon?

[uls]

posted above:

Today, the oil price is largely set in the two futures markets: London-based International Petroleum Exchange (IPE) and the New York Mercantile Exchange (NYMEX). Here, traders or investors buy or sell certain commodities like oil at a certain date in the future, at a specified price. Basically, traders invest in the futures market by buying futures contracts called "paper oil" or simply paper claim against oil. The very purpose of buying oil is not to wait for the actual delivery of the physical oil in the future, but to sell the paper oil to another trader at a higher price. That's how investors engage in widespread speculation; and it is becoming a viscous cycle. Almost all countries, including the Philippines, buy the oil at the spot market where the price is already at its peak.

In a year 2000 study, Executive Intelligence Review (EIR) showed that for every 570 "paper barrels of oil"-that is futures contracts covering 570 barrels-traded each year, there was only one underlying physical barrel of oil. The 570 paper oil contracts pull the price of the underlying barrel of oil, manipulating the oil price. If the speculators bet long-that the price will rise-the mountain of bets pulls up the underlying price (Valdes 2005).

This only disproves the popular assumption that oil price hike has something to do with the "law of supply and demand." In fact, as much as 60% of today's crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price (Engdahl 2008).

In its recent statement, IBON Foundation cited a study conducted by the U.S. Senate Permanent Subcommittee on Investigations, which revealed that 30 percent or more of the prevailing crude oil cost is driven only by speculation. IBON further cited that speculation adds about $35 to a barrel of crude oil (Martinez 2008).

o ayan. ano ba explanation ko noong 2008?

while everyone was cursing oil companies, i was saying it's speculators driving up the price of oil

fast forward to 2011, there's this guy who's blaming OPEC and oil companies for rising fuel prices

cartel, sabwatan, collusion, whatever

he obviously had no idea that there's such a thing as futures market where non-commercial players (like investment banks, hedge funds, retail investors - thru oil ETFs) can bet on oil

a small country like the Philippines can't do anything about it

even the US can't do anything about it

it's $4 per gallon gas in California

money will chase returns no matter where it is

speculators dont care if it's food commodities or energy commodities

they dont care if people go hungry or can't afford to gas up

food and oil are just assets like stocks, bonds, real estate

buy sell profit

that's the way of the world

some people just can't accept that

wanna change the world? go ahead. good luck

[uls]

I guess back then Mar was taking a popular position as he was eyeing to be the next President. Ngayon tahimik na.

About the OPSF, baka one source of fund for this is the Malampaya Natural Gas Project in Palawan. It is estimated to contain 3 trillion cubic feet of gas and 40 million barrels of recoverable oil reserves. Kaya na sana isupply yung oil requirement ng Pinas which is estimated at 313,000 bbl/day (2009 est.) while we develop alt source of energy (like autoLPG for cars).

Problema lang during FVR's time, hhe agreed to Shell and Chevron taking majority control (90%) of this project. Si GMA naman almost sold PNOC's 10% share to other investors (I guess gusto kumita sa transaction).

Buti na lang PNoy wants more control of Malampaya.

http://www.abs-cbnnews.com/business/...ampaya-project

It was during FVR's time that the deregulation of the the oil industry was made. Petron was privatized. Tapos the Malampaya project was even given the Shell and Chevron.

Bakit? Its the free market capitalism mode of development. Deregulate and privatize para daw may efficiency.

Sino kumita at kumikita ngayon?

it's always during times like this that people wish the govt owned an oil company

thinking that a govt controlled oil company can sell fuel at below market price

think about this:

Petron is NOT a crude oil supplier

Petron is a ONLY a refiner. Petron buys crude oil from abroad

even if Petron is owned by the govt, it will still have to buy oil at market price, refine the oil, then sell it to gas stations

so how will the govt, thru Petron, lower fuel prices?

wala magagawa ang gobyerno doon sa crude oil import prices

so doon sa refining margin titira ang gobyerno

deliberately make Petron operate at breakeven or at a loss

so the govt will be losing money operating Petron (like every other govt owned controlled corp)

so it's basically govt subsidy

every liter sold at Petron stations is subsidized by the govt. and where does the govt get money to keep Petron operating? TAXES

excellent

and since fuel prices are kept artificially low by the govt, other oil companies unable to compete pull out of the country

hahaha

fun imagining this

galing talaga ng mga advocate ng govt control and regulation. socialists.

[uls]

know how state controlled oil companies can afford to provide cheap fuel for their people?

COZ THEY OWN EVERYTHING

they own the oil fields and the refineries

Saudi Arabia govt owns Saudi Aramco. they own the freaking oil fields and the freaking refineries

their cost is very low. that's how they're able to provide cheap fuel in SA

tayo, nasaan ang crude oil natin?

even if the govt owned a refinery, it still has to buy oil from a producer like SA. at market price

before dreaming of a govt oil company, look for the oil muna. and bumili o magtayo ng refinery ang gobyerno

bilhin ng gobyerno yung refinery ng Shell kung ibebenta ng Shell

nakakatawa mga "academics"

walang experience sa business puro theory

[uls]

kahit ilan pa articles ang i-post, kahit ano pang "academic" discussion ang gawin, it's totally pointless

fuel prices will remain high as long as speculators are betting the price of oil will go up (long positions)

oil price will fall when speculators go short

i posted this in the economy thread on Feb 11, 2011

http://tsikot.yehey.com/forums/showt...=72656&page=70

RE US handling of Mubarak

the Saudi king is very unhappy with Obama

Deep US-Saudi rift over Egypt: Abdullah stands by Mubarak, turns to Tehran
http://debka.com/article/20650/

rumor of the Saudi king's death yesterday

things are gonna get ugly

go long oil

that was before Mubarak stepped down

people who followed my advice that time made a lot of money hehe

[safeorigin]

God forbid that we have a bigger govt than now

with the current administration...

ugh...

think about it!!!

[uls]

huwag umasa sa govt subsidy sa fuel

the govt already has tons of debt

the last thing it needs is more expenses

what it needs now is more revenue (anybody wanna bet the Aquino admin will raise taxes?)

the govt has a lot of debt coming due

i'm sure the govt is planning another bond issuance (in USD) to pay maturing obligations

[anonemus]

kahit ilan pa articles ang i-post, kahit ano pang "academic" discussion ang gawin, it's totally pointless

fuel prices will remain high as long as speculators are betting the price of oil will go up (long positions)

oil price will fall when speculators go short

i posted this in the economy thread on Feb 11, 2011

http://tsikot.yehey.com/forums/showt...=72656&page=70



that was before Mubarak stepped down

people who followed my advice that time made a lot of money hehe

I bet including you. Those who profit from others true sweat thru speculation are called by others as parasites.

[shadow]

I bet including you. Those who profit from others true sweat thru speculation are called by others as parasites.

ouch!

[anonemus]

Will Federal Regulators Crack Down on Oil Speculation?


Christopher Hayes – Tue Mar 8, 10:37 am ET
The Nation -- While the Labor Department’s announcement last Friday that US employers had created 192,000 new jobs seems to confirm that the American economy is indeed showing signs of life, the adjective most observers have used to describe its recovery is “fragile.” The reasons are obvious: unemployment is still staggeringly high, household debt and underwater mortgages continue to put a drag on demand, and impending budget cuts by state and federal government could push unemployment back up and the economy back towards contraction.


But arguably the biggest threat to recovery is the price of oil. If oil prices in particular, and commodities in general, begin to rise, those trends will almost certainly constrain demand and consumer confidence at exactly the moment they are most needed. This week oil traded at $104.42 a barrel, up 7 percent from last week and at its highest since the September 26, 2008, close at $106.89. And we know from recent experience the oil prices (along with all sorts of other commodities) can skyrocket with little warning. Cast your memory back to the summer of 2008, before the financial crisis and in the heat of the presidential campaign. That summer, oil hit $147 a barrel and gas hit above $4 a gallon; airfare went through the roof and nearly every single major carrier came very close to declaring bankruptcy. Food prices shot up as well, with wheat trading up 137 percent year over year in July 2008, and corn 98 percent. Famine and food riots spread throughout the globe.


Though it seems like a distant memory now, for about six weeks during the 2008 presidential campaign, all anyone talked about was the price of gas. John McCain and Hillary Clinton went so far to advocate for a temporary repeal of the gas tax, Congress held hearings and the Senate actually came close to passing legislation to crack down on oil speculation. And lest we forget, it was in this panic over the rising cost of living that the catchphrase “drill baby drill” was born.


So the White House should not only be worried about oil prices and recovery. They should also be worried about the well-established fact that when the price of gas spikes, the country’s politics go haywire. FiveThirtyEight’s Nate Silver recently showed that high gas prices are correlated with poor incumbent party performance in presidential elections. So not only do rising oil prices present the single greatest substantive policy challenge to a president attempting to cajole the economy into a sustained expansion—it presents the biggest political danger as well.


At first blush you might think that there’s not a whole lot the president can do about the price of oil. After all, increase in demand from China and India plus seasonal demand in the United States during peak driving months, combined with the instability in the Middle East, all seem to be pushing the price of oil up and are all outside the White House’s control. But that’s not the whole story.


In the wake of the price explosion in the summer of 2008, a bubble that extended to all kinds of commodities, including copper and wheat, a number of observers from George Soros to Hedge Fund manager Michael Masters to former Commodities Future Trading Commission staffer and derivatives expert Michael Greenberg concluded that the underlying supply-and-demand fundamentals couldn’t account for the sharp rise in prices. In the first six months of 2008, US economic output was declining while global supply was increasing. And even if supply and demand were, over the long run, pushing the price of oil up, that alone couldn’t explain the massive volatility in the market. Oil cost $65 per barrel in June 2007, $147 a year later, down to $30 in December 2008 and back up to $72 in June 2009.


The culprits, they concluded, were Wall Street speculators.


Commodities markets involve essentially two kinds of participants: there are so-called “end users” like farmers and airlines that use commodities markets as a form of insurance against future price fluctuations, and then there are speculators—hedge funds, investors, big banks that try to make money by correctly betting on those same price fluctuations. The presence of these speculators isn’t in and of itself a bad thing; in fact, they bring liquidity that should, in theory, make the market more efficient. According to an analysis by the House Energy Committee’s Subcommittee on Oversight and Investigations, in 2000, physical hedgers, trucking companies, farmers, bakers, made up 63 percent of the crude oil futures markets, with speculators accounting for the rest. By 2008, those proportions had basically flipped.


Of course, the Wall Street banks say there’s nothing to see here, but that’s hard to believe. It’s almost impossible to make sense of 2008’s massive commodity price spike without concluding that the speculators played an outsized role. When enough money floods into a booming market, Greenberger says it can “unmoor” the prices of commodities from their underlying supply-and-demand fundamentals. The basic mechanism by which this might happen should be familiar; it’s the same principle that drove the housing market bubble or the tech stock boom. When a bunch of people think the price of a stock is going to go up, they rush to buy it so they can realize the imminent gains. Of course, a surge of demand itself pushes the price up and the price cycles upwards until it pops. The difference being, no one puts Pets.com in their cars, trucks and airplanes.
“The most conservative thing that can be said right now [is that] this would be no time to dismiss the role that speculation plays,” says Greenberger. ” A moderate statement is that speculation is creating volatility that is aggravating the uncertainty in the market. If you start talking to industry people, they’re pulling their hair out. American Bakers Association is going bananas. They all believe that the markets are going screwy because of Wall Street.” A host of businesses and organizations from Virgin’s Richard Branson to Oxfam all make the same case.


One way to attempt to constrain these volatile mini-bubbles is for the Commodities Futures Trading Commission to impose “position limits,” essentially limits on the size of the bets that speculators can make. The New Deal–era Commodities Exchange Act gives the CFTC power to curb “excessive speculation,” and the just-passed Dodd-Frank bill explicitly calls for the CFTC to promulgate position limits.


Not surprisingly, the big Wall Street banks like Goldman Sachs don’t want this, and the two Republican members of the commission don’t favor any position limits rules with real teeth. To his great credit, CFTC Chairman Gary Gensler (a former Goldman banker I was quite critical of when nominated to the position) has taken a strong leadership position in advocating strong limits, and Democratic commissioner Bart Chilton has been supportive as well. That leaves the deciding vote in the hands of Democratic Commissioner Michael Dunn, who’s expressed misgivings.


Now, it just so happens Dunn’s term is up in June and last night MSNBC’s Ed Show reported that the White House has begun vetting his replacement. This may seem obscure and technical, but given the precariousness of the recovery and political explosiveness of gas prices, nominating a replacement enthusiastic about reigning in excessive speculation may be the single most important decision the White House makes between now and Election Day.

I'm sure uls would like these speculators to continue business so he and parasites like him can earn more money.

[oliver1013]

Hehe ok ah

[safeorigin]

last time I checked, people who push for subsidies are also called parasites

touché?

[Monseratto]

Tawag dun free loaders or moochers...

[uls]

hehehe

nice article

exactly like how i explained speculation in commodities some pages back no?

somebody here doesn't believe my posts coz puro opinions ko lang daw ang pinopost ko

he has to read it somewhere else bago siya maniwala

well?

tama ba ako?

[uls]

na-crash course tuloy re commodities and speculators

now he has an idea on how the world really works

but that's just part of the bigger picture

pls read about "regulatory capture"

and look for an article written by Simon Johnson (former IMF Chief Economist) -- Quiet Coup

the education continues...