Pathetic picture

The latest outburst of Energy Secretary Angelo Reyes warning oil companies not to tax his patience by withholding from the public a much-deserved price rollback on liquefied petroleum gas is another exercise in futility.

Reyes can scream his head off for a price rollback but we seriously doubt that anything good will happen until the oil companies feel that a price reduction is in their best interests. Good luck on that one since the local oil retail market is practically dominated by Petron Corp., Pilipinas Shell Inc. and Chevron Corp. or the Big 3.

All the small players in the local oil industry are really just that, small players. They are in no position to influence the retail market. The last time one of those small players decided to make a substantial pump price cut, these big companies simply responded by making similar cuts only in gasoline stations in the areas where the small players were operating. Not much public good there since almost nine out of every 10 gasoline stations are owned by the Big 3.

What the government should be doing is to level the playing field to make the local oil industry, particularly the downstream segment, more competitive while pushing for greater efficiency in energy use. It should be educate the public and tell the oil companies to stop peddling the idea that we are running out of oil, which only justifies more prices increases. It is this "resource pessimism" that is fueling the speculation on crude oil prices.

There is no quarrel that global oil supplies are not inexhaustible. These are finite and that is the nature of the resource. We must continue conserving this resource to the maximum extent possible and increase our dependence on renewable energy even as we continue efforts to find new sources for oil. The world has very much used up most of the easy-to-get sources of oil. Developing new oil fields will cost more money making oil more expensive in the long run.

But it is not as if we are on the verge of running out of oil any time soon. In fact, the recently published Organization of Petroleum Exporting Countries (OPEC) 2008 World Oil Outlook assures us that we have more than enough oil. The global estimates of proven recoverable reserves for conventional oil have risen from 1.7 trillion barrels of oil in the early 1980’s to the current 3.3 trillion barrels. Production, meanwhile has reached only a third of this increase. Refining capacity is also increasing with OPEC countries alone expected to finish US$66 billion worth of projects that would add another 5.9 million barrels daily between 2006 and 2011.

According to OPEC Secretary-General Abdalla Salem El-Badri: "Looking at the overall picture, however, the world’s remaining resources of crude oil and natural gas liquids are clearly sufficient to meet demand increases for the foreseeable future. New discoveries, reserve growth in existing fields, and the continuous application of new advanced technologies should also lead to the world expanding its conventional oil resources base to levels well above the expectations of the past. On top of this, there is also a vast amount of non-conventional oil to explore and develop. Availability is not an issue."

The passage of the Downstream Oil Industry Deregulation Act of 1998 brought with it much hope that the fuel oil prices would truly reflect market conditions. It did when oil prices skyrocketed to unprecedented levels and Filipinos were treated to the gory spectacle of weekly price hikes. It is ironic we are not getting the corresponding oil price cuts now that prices have dropped by almost two-thirds of the historical highs. Something is gravely wrong here and will continue to go wrong under a regime of monopoly control and "resources pessimism."