Denounce slow and small rollback of oil prices, demand bigger price cuts--CPP

Information Bureau
Communist Party of the Philippines
December 07, 2014

The Communist Party of the Philippines (CPP) today called on the Filipino people to denounce the slow, small and incommensurate rollback of prices of petroleum products in the face of the successive and sharp decrease in the prices of crude oil over the past several months.

The CPP issued this call after oil companies announced yesterday a reduction of prices of petroleum products by around ₧2.50 for every liter of gasoline and around ₧2.20 per liter of diesel.

"Oil companies and government officials describe this rollback as the biggest this year, and indeed it is so," said the CPP. "However, it remains small and incommensurate with the sharp decreases in the prices of crude oil at the end of November, as well as since June this year."

"After prices of international crude dropped by around 8-10% to $70-72 per barrel at the end of November, prices of petroleum products in the Philippine market should have dropped correspondingly at the same rates by around ₧4-5 per liter of gasoline and ₧3-4 for diesel," pointed out the CPP.

"Subsidiaries of big oil companies in the Philippines are raking in windfall profits every time they refuse to cut local prices of petroleum products correpondingly with reductions in the international prices of crude oil," pointed out the CPP. "The Filipino people are being exploited by the insatiable profit-hungry big oil company subsidiaries through cartel-fixing of local oil prices and refusal to effect a reduction in local prices of petroleum products commensurate to the reduction in prices of international crude oil."

"Since June, prices of crude oil have fallen by 38-40%, while prices of local gasoline products have been disproportionately reduced by less than 20%, and those of diesel by around 25%," added the CPP. "At around $70 per barrel, crude oil prices have gone down to 2007 levels at which point local diesel prices were at ₧25-30 per liter, much lower than current levels of ₧32.50-34 per liter."

"The Filipino people must demand a bigger reduction in prices of local petroleum products commensurate to the sharp fall in the prices of crude oil in the international market," said the CPP.

"They should also intensify their struggle for wage increases and demand a large reduction of prices of basic commodities, electricity, water and other services amid the reduction of costs of production."

"The people should demand a substantial reduction in train, metrorail, airline, ship, freight, long-haul bus and other forms of mass transportation," added the CPP. "The toiling people, must demand that government regulatory bodies train their sights on big industries instead of jeepney, tricycle, taxi and FX drivers and other small income earners engaged in transportation service."

Prices of crude oil in the international market have gone down sharply as a result of intensifying competition among oil producers amid the slow expansion of markets. US shale oil producers have stepped up production to unprecedented levels and have taken over half of the US market for crude oil. In an attempt to regain parts of the US market, Middle Eastern oil producers led by Saudi Arabia have stepped up production and reduced prices, forcing crude oil prices to go down since June.

Amid the prolonged recession of the global capitalist system, the demand for oil has failed to expand correspondingly, resulting in an increasing oversupply currently estimated at somewhere between 700,000 to two million barrels per day.

"Increased competition for limited markets, however, are bound to result in a reconsolidation of the oil industry and the emergence of new alliances and monopolies," pointed out the CPP. "The rapid fall in the prices of crude oil is temporary, at best, and will probably last up to mid-2015, after which they are bound to rise again as a result of monopoly price manipulation."

The average cost of crude oil production is estimated to be between $29 to $43 per barrel (and much lower in Saudi Arabia). But crude oil is sold at much higher levels in the market as a result of speculation and manipulation by big oil companies who control extraction and refining.