Reduce fares now
Talking about contentious issues, fuel prices will always top the list. Why? Basic need, as it is, we are all affected, regardless of whether the prices swing mildly or wildly and favorably or unfavorably. The bottom line is, in every swing, some profit while the rest just simply pay for it. Simply put, depending on which direction it goes, one loses, another one gains.
However, driven by greed, there are circumstances wherein a sector refuses to be fair and cashes in or takes advantage in all situations, the transport sector. As we all know, when fuel prices go up, they automatically demand for fare increases, as if the commuters do not already suffer from the consequences of it. As everything, supposedly, goes through a process, they go on strike to pressure regulators to raise fares right away and to the inconvenience of the commuting public. Inversely, when fuel prices go down, they refuse to bring the fares down proportionately. Selfishly, they would like to go through the long process and enjoy the drop in fuel prices to the hilt.
Now, let us put things in proper perspective. We are an oil importing country. We are in the receiving end of the swings in fuel prices. We don’t have a say on it. West Texas Intermediate or WTI crude this year opened at $95.44 per barrel. Its highest was on June 20, 2014 at $107.26, but just for a day. Since then, after a brief rollercoaster ride, it went below $100 per barrel ($98.17) in July 31, 2014. Then, it went below $90 per barrel ($88.85) since October 7, 2014. Then, it went below $80 per barrel ($78.78) since November 3, 2014. In November 28, 2014, it went below $70 per barrel ($66.15). Then, finally, just last week, December 11, 2014, it went below $60 per barrel ($59.95).
We may ask, is this situation now similar to what have happened before and, therefore, take these price slumps as very temporary? The answer is an absolute NO. To recall, oil prices dropped sharply and was hovering around $40.00 per barrel by the end of 2008. The reason then was very obvious. The world’s biggest consumer, then and now, is the USA. They consume more than 20 million barrels a day or more than ¼ of the world’s output. Therefore, demand for oil is, was, and will always be largely influenced by USA’s industrial and personal consumers’ behavior. Then, the USA was in dire economic crunch. Consequently, their oil purchases have considerably dropped as well.
Then, in the second half of year 2009 and the entire year of 2010, we saw oil prices swinging between $60.00 and $90.00 per barrel. Without much changes in the political and economic arena in 2009 when compared to 2008, people were wondering why oil prices went up to such level. The fact is, oil producing countries have different preferential prices. For one, OPEC countries are so dependent on it to maintain their budgets. So that, OPEC, being the world’s biggest cartel, opted for production cuts, as usual, and moved prices slowly but surely around $90.00 per barrel in 2011. Then, in 2012, with the political turmoil prevailing in most oil producing countries in the Middle East, production was severely affected and prices breached $100.00 per barrel once again.
Today, however, prices are going down again. Curiously, however, for a different reason. Rightly so, because, for one, the scenarios for price decreases and increases then are totally different now. Then, when the USA’s economy goes down, oil prices go down as well due to the lack of demand. But that is not true today. They are a lot better today than in 2007 or 2008. They have weathered the economic storm, so to speak. Therefore, oil prices should have either remain steady or up. Moreover, the ISIS is wreaking havoc in the Middle East far worse than all uprisings in the past few years combined. Therefore, logically, just like before, it could have affected production as well. So that, prices could have gone up too. But no, it didn’t.
The truth is, the USA, the world’s largest consumer, has increased its own oil production and, thus, has become less dependent on imports. This fact was confirmed by the U.S. Energy Information Agency. The agency reported that, “in 2013 the U.S. imported approximately 33percent of the petroleum consumed, the lowest since 1985. It also means, “net crude oil imports are down over 25percent in the last five years while the country is still more than 20percent below its peak production of 1970”. Moreover, they are now less dependent on oil imports from the Middle East. They are now importing most of their requirements from Canada. Therefore, OPEC has drastically lost its clout and could no longer influence or manipulate oil prices.
Therefore, it is safe to conclude that lower prices will stay longer, and, probably for good, unless, otherwise, the USA will change its agenda. Thus, there are no reasons, whatsoever, for the old fares to stay. Remember, oil prices have been cut significantly for quite a time now. Fare reduction, therefore, is long overdue.
Thus, reduce fares now.
- Latest
