Oil prices: Political weapon?

As the impeachment trial moves ahead, the political divide widens. It has worsened to the extent that even the incontestable facts are twisted to target a huge swatch of the voting demographics, the uninformed. Obviously, in their efforts to influence senators’/judges’ decisions. After all, they are still politicians (vote-hungry) and will always have certain levels of biases to protect their own interests.

Among many, the prices of diesel, gasoline, kerosene, LPG and other related products are taking the spotlight. Trying to manipulate the optics, they are comparing prices among former presidents’ terms until the present. The emphasis is that, prices were lowest during the time of the 2016-2022 president Rodrigo Duterte (PRD).  Simply put, they are trying to portray that PRD was responsible for it.

However, before we hand down our verdict, let’s all together drill down a bit and have an intelligent discourse altogether. For instance, globally, in 2008 (Pres. Gloria Macapagal Arroyo’s term), we saw the rise of oil prices (Brent) to US$147.00 per barrel (historically, the highest so far) per barrel in July when the US (the world’s biggest consumer) economy was so good and witnessed its plummeting to US$37.00 per barrel towards the end of the year when it was in dire economic crunch and its demand for oil dropped tremendously. So that, to recall, oil prices in the country had wild swings. Simply put, prices then swung in the same way the global prices did.

We also saw what happened on April 20, 2020 (Pres. Rodrigo Duterte’s term). To recall, apart from the triple “20” in such date that will only happen once in our lifetime, it was certainly a date that was historic and unforgettable in the oil industry. While Brent crude then was still selling at US$26, this was the day when future deliveries (actually, May deliveries) of West Texas Intermediate crude were selling at negative US$37 per barrel, the first time in history. It was because they no longer have available storage tanks. In fact, they even stored some of their produced in oil tankers (cargo vessels) and, of course, paid for it. As some pundits would say, the “demand didn’t destruct, it disappeared.”

To recall, domestic oil retail prices then behaved the same way but crashing established floor. Simply put, at its lowest, domestic prices pierce established floor (prices). That’s the reason why PRD’s term saw the lowest prices in recent history. And he had nothing to do with it.

Today (Pres. Bongbong Marcos term), oil prices are going up again. As we all know, the major oil-producing countries are currently facing severe threats across, at least, two primary categories: geopolitical conflict and economic downfall. Yes, we are no strangers to the war raging on in major oil producing countries in the Middle East. Today, it has worsened as missiles from warring countries are again dominating the skies. So unforgiving that these countries’ (Middle Eastern) already battered major energy facilities are now again under attack and some are reportedly beyond repair or will take years to repair.

Thus, even if this war ceases, returning to pre-war levels of oil output will take years.  Appropriately dubbed as the oil crisis, some pundits are now projecting that prices will only go back to the pre-Iran war level by 2032. That’s practically six years of agony for oil importing countries like ours.

CNN Business senior reporter David Goldman also had these observations. He pointed out that even if the wars will cease today, prices will not go down at once.  For one, in these countries it will take “2-4 weeks just to restart oil production (if production halted) in unaffected facilities.” Also, saying with warning that, “it’ll take a lot longer to build the countries back up to its manufacturing ability before the war.” This is so, as “facilities have to be fixed as most of them have been blown up.” Thus, he further said, that it will take a “huge amount of time” for these prices to hit pre-war level, when a barrel was going for about US$67 the day before Operation Epic Fury started in late February. His fearless forecast? Prices will go back to such level in 2032.

Therefore, consequently, whoever shall be the next president in the country will inherit these elevated oil prices. As a largely oil importing country, blame not any previous administrations, they have nothing to do with it. Rather, penalize opportunists (mostly, oil retailers) who are taking advantage of our miseries.