Sen. Francisco S. Tatad said yesterday the possibility of a new oil shock, similar to those that occurred in the 1970s, is real, and the government needs a comprehensive strategy to cushion its impact, in case world oil prices fail to soften and oil producers show no signs of lifting agreed production ceilings by March this year.
For the first time since the 1991 Gulf war, because of production cuts, the price of Brent crude oil is now $30 per barrel. There has been no sign of production going up and prices going down. Some analysts had predicted production cuts could stay beyond March.
"Although domestic inventories are unaffected by the price increases, and we do not expect any local price movement in the next few days, a sharp run-up in gasoline prices could occur if world production does not increase after the next OPEC meeting. Right now, we're all the mercy of OPEC. We could be seeing a replay of the oil situation of the 70's," Tatad, who used to head the Senate energy committee, said.
Tatad called on the Department of Energy to put in place a comprehensive plan that includes an easy-to-implement formula on how to make the oil-dependent sectors, such as power and automobile, more efficient users of energy, and how to make use of cheaper and more readily available indigenous sources of energy. The plan should also include a more efficient use of available mass transport systems and more efficient management of traffic in densely populated urban centers, Tatad said.
Tatad, who chairs the Senate committee on foreign relations, also urged the government to utilize the oil situation as an opportunity to win the help of members of the Organization of Petroleum Exporting Countries in easing the country's oil problem and in financing new development ventures in Mindanao.
With oil production cutbacks driving world prices upward, OPEC stands to regain its old political and economic power, and become once more a rich source of petro dollar investments, Tatad said.
"These investments must be courted, if not for the entire country, at least for Muslim Mindanao, which needs vigorous infusions of development capital. This is also the best way of getting the Arab countries to help in calming down the warlike elements in Mindanao," Tatad said.
He said he had been assured by official energy sources that the country had enough oil inventories purchased at old prices before the recent world price increases. But it is not clear how long these would last, and at what prices the oil companies had agreed to pay for future deliveries.
Last week's report by the International Energy Agency showed a sharp decline in inventories of crude oil worldwide. The Organization for Economic Cooperation and Development -- whose membership is limited to the world's richest countries -- reported the lowest inventories since 1997.