By REX MENARD CERVALES

With the oil prices soaring, Raul Zarraga, 48, brings home nothing but sorry to his two kids—no more ChickenJoy and new dresses, only meager earnings after over 17 hours plying the UP Ikot route every day. 

"Ang byahe naman, talagang patayan na," he said. Just recently, he paid P610 for a new fare matrix on TRAIN-induced fare hikes, which only got revoked after two weeks due to fuel price cuts. While Mang Raul can maneuver his jeepney on congested roads, he has no control over the circuitous calculus of the dues of his daily grind amid sharp oil price fluctuations.

The government, however, believes that the drivers and the commuting public will soon break free from the agony of the oil problem. Supposedly to alleviate oil price shocks, President Rodrigo Duterte inked a memorandum of understanding during Chinese President Xi Jinping's visit to Manila for an oil and gas development in the disputed West Philippine Sea. 

Even before this, he had granted the first Petroleum Service Contract (PSC) under his term—a seven-year exploration deal that permits the Israeli firm Ratio Petroleum Ltd. to explore waters east of Palawan.

The government has engaged in these transnational negotiations, realizing that the Philippine oil industry stands in troubled waters because of its incapacity to explore, mine, and refine oil. Yet these efforts to address concerns with the country's energy security only show the predominance of and utter reliance on foreign capital at the expense of the national interest.

Greasing the Skids

With only five wells being drilled annually on average, per the Department of Energy (DOE), the Philippines still lags behind its neighboring countries in upstream petroleum activities despite explorations as early as 1896. The country has since welcomed such activities especially when the Petroleum Act of 1949 was signed into law, awarding concessions to independent contractors.

In the 1970s, however, the Philippines suffered from an oil crisis that prompted consumer price inflation and wage stagnation. Then-President Ferdinand Marcos inked Presidential Decree (PD) 87 or the “Oil Exploration and Development Act of 1972," which opened the country up to more offshore explorations with incentives like tax exemptions, reimbursement of operating expenses incurred, and the unrestricted determination of crude oil prices by the corporations.

The ambition to supply the country's oil requirements and promote more development of local resources paved the way for the opening of the Malampaya natural gas project. It has had the highest production rate among local oil reserves, but its generating capacity of 3,211 megawatts constitutes only 30 percent of the country's power generation requirements, according to the DOE.

Additionally, the state owns only 10 percent of the Malampaya, while the rest is shared with the private sector, between Shell and Chevron. The domination of these transnational companies (TNCs) along with Petron, which are collectively called the Big Three, has persisted since 1983 when they began to acquire other, smaller oil companies.

Over a Barrel

Oil exploration efforts remain futile, indeed, as long as only a few companies dominate the industry from refining through distribution to retail. Making up a cartel, they make it harder to regulate oil price fluctuations.

“Ngayon mababa ang presyo, pero ilang araw kaya 'yan? Ilang linggo, pagkatapos nitong December, bubulusok na naman 'yan, apektado na naman ang pamasahe,” Mang Raul said.

Attempts to institute a competitive system of awarding PSCs, however, do not resolve such problems in the downstream industry as oil price hikes. The local oil companies are, after all, only subsidiaries of giant TNCs—such as Royal Dutch for Shell, Saudi Aramco for Petron, and Chevron Texaco for Caltex—all of which have the capacity to process crude oil given their pipelines, refineries, and depots abroad.

Oil prices can only be moderated by reducing the dependence on foreign firms, said Sonny Africa, executive director of the independent think-tank IBON Foundation.

The public cannot likewise blame cost surges on the Organization of Petroleum Exporting Countries (OPEC), a multilateral group of oil-producing countries supposedly coordinating oil price negotiations. Its mandate is limited only at the extraction stage. The remainder of the pump price of petroleum products is set by the TNCS, which in turn resort to monopolistic schemes. 

Through one such practice, transfer pricing, the prices are bloated as the product is being transferred through various units of the same oil-processing TNC down to the end consumer. These super-profits are reaped also via other stunts by TNCS, such as inducing artificial oil scarcity, wherein production is downsized despite actual minimum capacity just to aggravate market demand for oil.

In the Philippines, the slim differences in oil prices set by the Big Three and the delayed rollbacks speak of the oil cartel's manipulative tactics, which laws of supply and demand cannot simply explain away.

Breaking Ground

The monopoly of TNCs is abetted by a government that also rakes in profit from spoils in the form of additional taxes on already exorbitantly priced oil products.

In 1998, for instance, to comply with one of the conditions attached to the $650 million loan from the International Monetary Fund and World Bank, then President Fidel Ramos ceased the government's direct intervention in downstream oil operations. The Oil Deregulation Law was supposed to promote competition among different players, but has in reality only let big oil companies adjust prices at their own whim.

In the face of decades of domination by TNCs, the government should opt to reclaim the oil industry. "Ang direct engagement ay hindi magagawa overnight," said Africa. "Pwedeng magsimula sa maliliit na companies, then ang Petron i-renationalize siya.”

Only through such an industrial overhaul can the country go on to ensure full benefit from its own resource-rich waters.

"Ang bottomline kasi ay [may] dalawang kailangang gawin ng Pilipinas para kumawala sa dependence sa imported oil. Una, dapat i-develop ang sariling kakayahan nito to exploit ang oil and gas resources natin," Africa said. This entails a repeal of PD 87, which at present allows foreign businesses like Ratio Petroleum Ltd. and governments like China to enjoy maximum perks on the country's reserves.

"Ikalawa, kailangang may long term na pag-shift talaga mula doon sa fossil fuels to renewable energies,” Africa added. Pollutive oil-dependent energy sources shall be replaced with renewable energies like solar energy.

Though this initiative will not be realized immediately, the government must now already work on a strategic vision for rational energy policy. "Unfortunately, sa dalawang punto na 'yan, walang ginagawa ang Duterte administration,” said Africa. 

A collection of transnational exploration deals indeed pays no heed to the clamor of the jeepney drivers and the commuting public, who bear the brunt of the oil problem. At the end of the day, it is the state's duty to fix an industry rigged to privilege corporate interests; to guarantee that folks like Mang Raul will bring home nothing less than what his family deserves—the rightful rewards of his daily grind.●

Published in print in the Collegian’s December 14, 2018 issue.