Another major oil price hike hits consumers today, a week after we endured a price spike. The forecast for this vital commodity is discouraging.
The sharp rise in global oil prices could be the front act for an even more serious problem. There might not be enough oil supply to meet the needs of the world’s economies.
According to a report by global bank JP Morgan, world oil inventories are projected to hit their operational floor this month if the Strait of Hormuz remains constricted. Below this level, pipelines cannot maintain pressure and refineries could start failing.
Should refineries fail, the ability to refine oil into usable products will be impaired. Even if Hormuz fully opens, refineries may have to be rehabilitated. The disruption could last longer. Everything becomes an engineering problem, not only a geopolitical one.
In the weeks after the US attack on Iran, governments tried to manage the movement of oil prices by drawing on their strategic petroleum reserves. The drawdown has been such that the reserves are now exhausted. Without the reserves, there is no way the price shocks could be cushioned. This is the reason oil prices are spiking everywhere.
The worse news is that the geopolitical factors causing the oil crisis are getting more severe. Oil deliveries are not only restricted at the Strait of Hormuz. Deliveries through the Red Sea could be blocked at the Bab al-Mandab strait. Houthi forces, allied with Iran, have launched a surprise offensive that extended their control over Yemen’s coastal areas adjacent to the vital strait.
The Houthi offensive now gives the group better ability to harass commercial shipping. The group managed to attack Saudi oil pipelines, including the east-west pipeline that provided an alternative to shipping oil out of the Persian Gulf.
US forces in the region have yet to participate in pushing back the Houthi offensive despite urgent request to do so from Saudi Arabia. There is talk of an arrangement between the US and the Houthis for the former to desist from attacking the latter in exchange for guarantees American commercial shipping will not be attacked.
Saudi Arabia is in obvious peril. The ruling family there avoided building a strong military because it feared a coup being mounted. Saudi military units are led by members of the royal family, not necessarily the most competent commanders available.
For fear the situation in the region might deteriorate further, European countries and Japan have offered to help in securing the shipping lanes. But this might be too late. Oil shortages may begin affecting the world’s economies in a couple of weeks, setting the stage for recession.
Money trail
We see from the ombudsman’s complaint filed against former speaker Martin Romualdez the sort of painstaking work required to uncover the money trail originating from the flood control scam. Corruption, even on a grand scale, is hard to document. Cash is fungible and receipts are never issued.
Consider the controversy over the Mahayhay-Tuburan road project in Del Carmen, Surigao del Norte. The road was reported as completed. The contractor has been fully paid. But on inspection, the road is only partially built.
The ombudsman has taken notice of this particular project and mentioned Surigao del Norte Rep. Francisco “Lalo” Matugas and his son, former congressman Francisco “Bingo” Matugas II, in connection with this uncompleted project. Both deny any connection with this project.
Investigators have identified the contractor as Boometrix Development Corporation. Ronald Abejo and his wife Princess are the principal shareholders of the contracting firm. Abejo is a nephew of Lalo and first cousin of Bingo.
Family relations is only part of the story, however. It does not firmly establish the involvement of Matugas father and son to the failed project. Construction of the road was sealed in a contract between the DPWH and Boometrix. There is no documentary record that Matugas father and son actually participated in selecting the contractor, implementing the project and certifying the accomplishment for purposes of full payment.
This particular project has a contract price of P85.9 million and a contract effectivity period from March 6 to Oct. 28, 2022. The last payment on record was made on March 24, 2024.
Corporate documents do not show that either Lalo or Bingo were involved at any point as incorporator, shareholder or officer of Boometrix. Neither of the two signed any contract documents for the road project. As far as the documentary evidence goes, neither the father nor the son is implicated.
The ombudsman suggests the two politicians are involved in this anomaly. This is a tough matter to prove. The anti-graft agency needs to go beyond the family relationships and the documentary evidence. They will have to find something that connects the two politicians to the anomalous project.
Bringing Boometrix to court to account for a fully paid but unfinished project is easy. Establishing that this anomaly was made possible because of some act of political brokerage is what will challenge the investigators.
There are tens of thousands of public works projects akin to this one. They are either unfinished, substandard of completely ghost. In each of them, politicians are suspected of involvement.
But mere suspicion does not produce conviction. The case against Martin Romualdez and whatever possible case might be filed over this incomplete road in Surigao del Norte requires heroic investigative work.