NIGHTMARE OF HIGH OIL PRICES

The Philippine Star
09/20/07

Throw away all those theories and formulas. Even the mighty OPEC is baffled by the continued record-breaking rises in oil prices, even as it insists that its little black book says there is enough oil being pumped out of the ground to cover what is being consumed by the world's economies.

Crude oil prices just broke new levels this week, and we now have a fuel that is more than a third higher than what it was at the start of the year. There is no war in the Middle East, no significant damage to refineries, and no world-threatening crisis that gives plausible excuse for its recent anomalous rise.

Based on extrapolations, or what economists refer to as the price of crude oil without factoring in inflation over the years, prices today have not yet breached the $90 peaks reached during the 1979 Iranian Revolution. It's small comfort to note that we seem to be slowly inching towards it – and there's no World War to blame it on!

The Organization of Petroleum Exporting Countries or OPEC, created in 1960, is the world's dominant fossil fuel supplier, accounting for over 45 percent of crude oil production and 18 percent of natural gas. Pre-OPEC, crude was sold at less than $3 a barrel.

Back then, a liter of gasoline in the Philippines was to be had for mere centavos, and any incremental movement in the price of pumped fuel at service stations, however minute, triggered Congressional hearings and the outpouring of student activists and jeepney drivers to the streets.

With wild swings in crude prices, we again see a volley of “experts” on the global energy sector with an updated set of slides that remind eager audiences just how vulnerable developed economies are on fossil fuels. Time has humbly taught anyone who attempted to “predict” tomorrow's crude oil price to just shut up.

It was with much reluctance and foot-dragging that OPEC announced early this week they were pumping an additional 500,000 barrels of oil per day in November to cover for what they claim is a perceived undersupply in the world market and an expected rise in fuel stockpiling in preparation for the winter months in the temperate zones.

Even then, prices in the world markets continued to rise. This has simply forced us to accept with eyes more open that we are no longer secure in a world fueled by oil and fossil fuels. This is an immutable fact that could drastically reshape the way our economies will run in the near future.

Racing for alternatives

So what do see now? At their heels of this realization are the merchants, guys that sell all forms of energy saving devices or alternatives to non-renewable fuel. Hooray for commerce and the free world!

The US is bullish about tinkering with its mix of power sources, and is even considering more nuclear-based energy to substitute for its bunker- and coal-fired power plants. It has also initiated programs that will give incentives for more energy-efficient manufacturing facilities, partly in recognition too of the threat of global warming to the world.

If there is one country that is big on stockpiling, it is China today. After experiencing severe power shortages that affected its manufacturing output in the early part of the decade, the world's 2^nd biggest oil consumer has become paranoid about its weakness and has been pushing for new sources of natural gas and oil outside its territory.

Between the US and major developing countries like China and India, the latter are more vulnerable to crude price escalations. The US, for one, has a better mix of energy sources, and is less dependent on OPEC member countries for its crude diet.

China and India, and even the Philippines, have a greater thirst for oil that comes from the Middle East. And they have less flexibility with regards shifting their source of electricity power, making them very vulnerable to prolonged volatility in crude prices.

Helplessly watching

It isn't surprising that our central bank has voiced its concern over recent events. After all, the government had been working so hard during the last years to tune up the engines of growth of the local economy and have it smugly humming.

An era of an $80-per-barrel of crude oil could just set us back to square one.  Bangko Sentral ng Pilipinas (BSP) Governor Tetangco expressed concern that if the high crude prices in the world market will immediately be reflected in the local pump prices, it will drastically impact on inflation expectations.

Is there anything the oil companies, Petron, Shell, which these past years have reported huge record-breaking profits, can do momentarily? Strangely, they have been silent these days.

The hardest fact to swallow with everything that is happening now is that we have barely a say in it. We are mere spectators watching a tableau where bigger forces are at play; all we can do is sit tight and hope that the ending is not one that is tragic.

PPT poker clinics

Philippine Poker Tour (PPT), the leading proponent of non-wager poker skills tournaments, is extending its invitation to those who want to learn the game of poker to attend the training sessions being conducted daily at THE PLAYER'S DEN, the PPT clubhouse, located at 1786 A. Mabini, Malate, Manila. Registration starts at 6 pm.

Poker “free-rolls” (no tournament fees) are also scheduled daily and at stake are seat certificates with total value amounting to P100,000. Winners of the “free-roll” are qualified to join for FREE satellite competitions where Seat Certificates to the Main Event worth P55,000 each are awarded.

The Main Event of the 4^th PPT Million-Peso Hold'Em Champions competitions, the only locally organized tournament that guarantees the champion a minimum of P1 million as prize, is scheduled to be held on 15^th December 2007.

For details and schedule of events at THE PLAYER'S DEN, visit www.PhilippinePokerTour.com or call the PPT Secretariat at 812-0153, 524-7254, 0926-6452956, or 0920-9218891.

“Pag-usapan Natin” at IBC-TV 13

Watch “Pag-usapan Natin”, a segment in the IBC-TV 13 news program, News Tonite, from 10:30 pm to 11 pm (Mondays to Fridays) as we discuss issues that have relevance to our everyday living. Viewers may send their comments to Sunshine Television c/o Valle Verde Country Club, Pasig City.   

Should you wish to share any insights, write me at Link Edge, 25^th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reydgamboa@yahoo.com.

TOP