Oil exploration: A must

While the favorable developments in a country where the rest of the world’s economy largely depend are very encouraging, the same positive news may present serious concerns to some countries in the globe. While it is true that exports to the USA may soon pick up, the downside could pose a problem to countries, like the Philippines, that are largely dependent on oil imports.

Obviously, when the US economy starts rebounding the demand for oil will certainly increase. Logically, oil prices will again shoot up. 

Notably, just this week, oil moved beyond US$70.00 a barrel. Such upward swing was attributed to encouraging news that not only that the US is showing signs of recovery but China as well. Knowing fully well that these are the two largest oil consuming countries in the world, the commodity’s price index moved cautiously upwards. Coupled with the steadily increasing production cuts by the Organization of Petroleum Exporting Countries (OPEC), the market prices will certainly go up towards the end of the year. Inarguably, all indicators (as mentioned in my previous columns) point to oil prices expecting to hover in the vicinity of US$75.00 per barrel towards the end of the year.   Consequently, local prices are steadily increasing.

More likely therefore, if not attended to, few weeks from now, the country will usher in another distasteful sight that may be viewed before a nationwide audience – the left-leaning organizations’ way of solving problems. As usual, on primetime, we could be witnesses of these thugs’ hooliganism and their penchant of destroying others’ legitimately built properties. They shall condemn them no end and tag the giant oil retailers as ruthless perpetrators of all our miseries.

Apparently infiltrated by ideologues, jeepney operators’ and drivers organizations will certainly join the call. They will again stop plying their routes to the inconvenience of the general public. Obviously, they will use their (ideologues) mastery of blowing peoples’ pent-up sentiments into wild and uncontrollable emotions. Though hollow to most of us, their misinformed flock will surely take their rhetoric as gospel truth. All these misguided statements and seemingly libelous invectives stemming from a singular root of perceived and felt miseries - the inevitable increase in oil prices.

Certainly, questions will again be raised on the effectiveness of the oil deregulation law. In this respect, we have to reemphasize that the deregulation act is very explicit on how oil prices must be pegged domestically. The Deregulation Act clearly stipulates that domestic fuel prices will be adjusted automatically based on the Singapore Import Parity, an average of costs at Singapore refineries, and in line with international prices. On the other hand, while they shall claim that the giant oil retailers have formed a cartel, the same act explicitly prohibits cartelization.

Led by Gov. Gwen Garcia, the Cebuanos never let this development pass. As we are all aware of, Gov. Garcia filed a complaint against the three (3) major players in the industry with the joint Department of Justice and Department of Energy task force on oil deregulation. She was supported in this crusade by some prominent businessmen and Chamber presidents. However, as if adding insult to injury, the retail prices have continually increased recently. 

Though we are joining with Gov. Garcia in her crusade against the disparity of oil retail prices among the country’s major cities, we can’t be with her on whatever insinuations to stop them from increasing. On account of the US looming recovery and China’s increasing demand for oil, the global prices for oil will certainly increase. As of yesterday, the world is already staring at prices going beyond US$70.00 per barrel. 

The reality is, oil prices are a consequence of the interplay between supply and demand. Needless to say, giant oil fields are aging and new discoveries are scarce. Some great oil finds between 1930 and 1960 are more than 40 years old. Some of these oil fields have peaked several years ago and are on the decline in recent years. Even the Ghawar oil field in Saudi Arabia, the world’ biggest oil field which was discovered in 1948 has declined in recent years. Though in 1948, its size was reportedly between 66 to 150 billion barrels, and supplied half of Saudi’s oil out for decades, the country’s production in 2007 dropped by 6% (from 9.15 million barrels per day in 2006 to 8.62 in 2007). 

Likewise Mexico and China are nearing peak as well. Mexico, the second-ranking supplier to the United States after Canada, peaked in 2004 and is now in steep decline. Experts even boldly predicted that Mexico could be an oil importer by 2015. 

Recognizing this hard reality, instead of spending more time arguing or crafting options that shall only focus on temporary solutions like duties and tax exemptions or subsidies, we’d rather focus on lasting solutions.

Lest we must forget, that while respected geologists believed that “it is almost inconceivable now that major fields remain to be found” we are able to find one (that in Pinamungajan). Though relatively small, it is believed to be commercially viable and could be the “light at the end of the tunnel.” However, with dolphins, whales and sharks going to courts (like the ones in Tañon Strait) to protect their habitat, its full development could be a remote possibility.

Such is the real challenge of Gov. Gwen Garcia. Instead, of spending more time challenging and attending hearings on issues against the giant oil retailers, she’d rather wield her influence in convincing warring parties in the exploration of the potential oil deposits in the Visayan seas become a reality. Undeniably, that is the real solution.

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