(First of a series)

Skyrocketing oil prices have become a global concern and a source of much debate as to what really lies behind them

IBON Features– The market price of crude oil has more than doubled over the past year to reach record-high levels of over US$147 per barrel last July. And oil prices continue to fluctuate, with industry players blaming a number of factors, including jitters caused by the current financial crisis in the US. Skyrocketing oil prices have thus become a global concern and a source of much debate as to what really lies behind them.

Executives from the major oil companies who were recently grilled before the US Senate Judiciary Committee once again attributed record-high oil prices to “the fundamental laws of supply and demand.” But while such market factors are responsible to a certain extent for high prices, they do not take into account other factors, such as speculation. Crude oil, also known as petroleum, is the most actively traded commodity in the world, with the largest markets in New York, London and Singapore Exchanges. Prices commonly quoted are those in spot markets (Dubai for crude and MOPS forrefined petroleum products).

In an article that appeared in BusinessWeek in May, Larry Chom, chief economist for Platts (the world’s leading provider of energy information), said that the actual costs in producing the most expensive barrel of oil is only around $70 or $80 a barrel, with the remainder the “market’s risk premium plus speculation”. This implies that the current price of US$147 a barrel is inflated by some $67 to $77 a barrel due to speculation.

Speculation artificially increases oil prices because most oil is not traded in spot or futures markets but through long-term supply contracts. Because ofvertical integration, most oil traded is between TNCs divisions (intra-TNC transactions) and do not need a spot market, yet the amount or the volume of trading in the commodity markets has substantially influenced pricing.

It should be noted, however, that oil transnational corporations, while they may not be directly engaged in speculation, do benefit from it. At the Senate hearing, John Hofmeister, president of Shell Oil, the US arm of Royal Dutch Shell, admitted that his company could be successful with oil prices at $35 to $65 a barrel. A mid-2006 report released by the Bank of Kuwait said that in Saudi Arabia, the break-even point on a barrel of crude is US$33, while in Kuwait it is only US$17. 

Thus, the current US crude-oil futures price represents record windfall profits for the oil companies. Exxon Mobil, the largest oil company, reported record 2007 profit of US$40.6 billion while Royal Dutch Shell reported the largest earnings of any company in Britain of some US$31 billion.

But speculation itself is not enough to explain high oil prices. For that, the structure of the global oil industry itself must be scrutinized. Historically, the global oil market has never enjoyed genuine free competition since it has constantly been dominated by a handful of American and European oil giants. The current term for these oil giants is
“supermajors,”  meaning vertically-integrated private-sector oil and gas companies engaged in all stages of the oil industry– exploration, production, refining, trading, marketing, and, sometimes, transportation.

The six “supermajors” are: ExxonMobil (US), Royal Dutch Shell (UK-Netherlands), British Petroleum (UK), Total (France), Chevron Texaco (US) and Conoco Philips (US). These six firms jointly account for US$1,482 billion in revenues and US$134 billion in profits as of 2006 according to Fortune magazine. They can also produce more than 80 million barrels per day of crude and refine more than 112 million barrels per day of various petroleum products.

The monopoly control the oil firms exert over the market allows them to manipulate prices. In 2006, for example, the US Commodity Futures Trading Commission filed a civil lawsuit against British Petroleum (BP) North America, alleging that BP traders– with the consent of senior management– “purchased enormous quantities of propane” to establish a dominant position in the market and then withhold fuel in order to drive prices higher.

It is also a myth that the Organization of Petroleum Exporting Countries (OPEC) dictates world oil prices. Although the OPEC member-countries account for two-thirds of the world’s oil reserves, and, as of March 2008, 35.6% of global oil production, the supermajors still control the infrastructure needed to transport and refine crude oil, and market and retail refined oil products. The supermajors in fact currently account for one-third of global refining capacity.

Meanwhile, Big Oil has also been blaming state-owned oil firms such as Gazprom (Russia) and the National Iranian Oil Company (Iran) for high prices by claiming these firms deliberately maintain low production in the same way OPEC does. In fact, the largest state owned oil firms have been lumped together by analysts as the “New Seven Sisters,” a reference to the seven largest oil firms that controlled the industry in the mid-20th Century. State-owned oil monopolies reportedly account for more than 90% of the world’s oil reserves.

But these claims may only be a ploy to pressure these oil monopolies to allow more investments by the supermajors. Mexico’s constitution since the 1930s has prohibited any foreign investment in the local oil sector. Venezuela, Russia and Ecuador closely collaborated with Western firms in the 1990s but recently started seizing their assets through a series of privatizations. Peter Robertson, vice chairman of Chevron Corp., has said if major oil companies had access to the vast resources of these countries, they would be using their ample profits to pump more oil at cheaper prices.

Locally, the Big Oil TNCs use their monopoly position to manipulate prices. Since oil firms’ purchases are actually under contract arrangements, this provides room for the local subsidiaries of Big Oil to generate more profits by jacking up pump prices whenever the spot market prices goes up, even if their oil prices have been negotiated long before with lower prices. This explains the weekly oil price hikes that have followed in the wake of upward movements in the oil spot market. 

Locally under a deregulated environment, consumers are left with no choice but to bear the brunt of the increases in domestic pump prices caused by speculation and wild price hikes in the global oil market. Meanwhile, speculators and the giant oil companies rake in billion of dollars in profits. 

While it is true that the Philippine government cannot control the activities of the speculators and the giant oil corporations, it can intervene at least in the local oil industry to protect the Filipino consumers. Unfortunately, amid the hardship that Filipinos face because of high oil prices, government continues to waive its authority to regulate the local oil industry.

Jealous Laguna woman attempts suicide–police

By Abigail Kwok
First Posted 17:25:00 09/18/2008


MANILA, Philippines — A woman driven by jealousy attempted suicide in the municipality of Magdalena in the province of Laguna early Thursday morning but was saved by her neighbors, a police official said.

The 35-year-old drank pesticide in Banaan village around 10:30 a.m. because she suspected her husband of seeing another woman, said Magdalena police chief Senior Inspector Raul Sandoval.

But the victim was spotted by neighbors and rushed to the Laguna Provincial Hospital where, as of posting time, she is in stable condition, Sandoval said.

Sandoval said police records showed the woman had reported to police last August 6 that her husband was allegedly having an affair.

It was also in Magdalena where a woman killed her three young children and then herself with toilet bowl cleanser on September 9.


Contrary to Pres. Arroyo’s statement that her administration’s economic measures will withstand the current global financial crisis, research group IBON Foundation says it is precisely government’s economic strategies that have made the Philippine economy overly vulnerable to external factors.

The chronic dependence on exports, foreign investment and debt– including official development aid that ends up as foreign debt– is at the heart of the economy’s vulnerability. Economic relief measures are thus urgent as the people will bear the brunt of the effects of the global crisis on the Philippine economy.

The government overplays the so-called “decoupling” effect where the Philippines is supposedly much less dependent on the US market. On the contrary, developments in the US will still have a severe impact on the local economy as the US remains one of the country’s top exports and investments partners. Third-party partners such as South and East Asian markets are also finally linked to the US ambit.

Drops in US consumption and investments will be deeply felt as the largest part of Philippine exports directly or indirectly goes to the US . Around 20% of foreign investment in the country comes from the US . Further, some 20% of exports already directly go to the US but a large part of exports to Japan, China , Hong Kong , South Korea , Taiwan and Malaysia which take up another 50% of exports, are actually components for assembly into products whose final destination is still the US . Slower growth in third party countries that depend on the US and which the Philippines deals with will also have adverse effects on Philippine exports manufacturing.

Even the vaunted local information technology (IT)-enabled industry will be likely hit hard because of its considerable dependence on the US market, further aggravated by the continued peso appreciation. The US is an overwhelming presence in the business process outsourcing (BPO) sector and accounted for nearly 90% of total BPO exports revenue and over two-thirds of foreign equity in 2005. The impact will be most felt in the National Capital Region (NCR) where an estimated 80% of BPO employees are located.

Slow global growth could restrain OFW deployments and slow down remittances which will reduce domestic consumption. The global financial crunch could also result in further cuts in the salary and benefits of OFWs as employers react to the crisis. All this highlights the folly of government economic strategies which unduly rely on external factors instead of creating jobs and producing goods by building domestic agriculture and industry.

Immediate economic relief measures have to be taken to arrest the inflationary impact of the financial crisis starting with the removal of the regressive RVAT on oil. Other urgent measures include implementing a nationwide across-the-board wage hike, increasing the budget for social services, and suspending debt payments because of the people’s urgent need for resources and support.

It is becoming all the more urgent for the government to put a stop to failed policies of globalization. Beyond the immediate economic relief, much more meaningful over the longer term is to focus all efforts to build a genuinely self-reliant domestic economy.

Editorial:Pain and poverty

Philippine Daily Inquirer
First Posted 23:20:00 09/15/2008


Part of the sardonic theme song of the movie “M.A.S.H.” goes this way:

“…So this is all I have to say…
That suicide is painless,
It brings on many changes
And I can take or leave it if I please…’’

Sure suicide can be painless, but that a person should take his own life usually indicates that he or she had been in great pain. Suicide is often an act of desperation, of hopelessness, and is usually preceded by a period of depression. Some psychologists say that most people who attempt or commit suicide don’t really want to die—they just want their pain and suffering to end.

Last week, extreme poverty drove Janeth Ponce, 32, to poison her three children and then commit suicide in Magdalena, Laguna, according to the police. The desperate housewife forced her children, aged 4, 3 and 2, to drink a bottle of toilet bowl cleaner in their house. She then drank the poison herself. 

On Nov. 2 last year, Mariannet Amper, 11, committed suicide in Davao City. An unsent letter and a diary revealed the reason for killing herself: She had lost hope that her family would ever rise from poverty.

The Ponce and Amper suicides are not the first cases attributed to extreme poverty to be reported in the Philippines, nor will they be the last, unless the problem of poverty is solved in the near future.

The Philippines has always been counted among the poor countries of the world. Last Aug. 27, the Asian Development Bank said in a report that the new poverty line in Asia-Pacific is $1.35 (about P61) a day and about 23 million Filipinos were living below that. Using 2006 data, the ADB study estimated that about 27 percent of the Philippines’ 90 million people lived on less than the new regional benchmark of $1.35 a day. The new measure suggests that there is a higher poverty incidence in the Philippines than was recorded in previous estimates.

A survey by the poll group Social Weather Stations in the first quarter of this year showed that the number of Filipino families that considered themselves food-poor rose by one million, from 6.1 million families in December 2007 to 7.1 million last March. The latest figure is equivalent to 40 percent of Filipino households, up from the previous quarter’s 34 percent.

The Philippines exhibits a highly inequitable distribution of income. In 2003, the share of income accruing to the richest 10 percent of the population was more than 20 times the share of the income of the poorest 10 percent, according to the ADB. Since 1985, the richest quintile (fifth) of the population has consistently commanded more than 50 percent of total family income in the country, with the poorest quintile having less than 5 percent.

The situation of the poor is bad, and it is not getting any better. The common perception is that the rich are getting richer and the poor are getting poorer. Extreme poverty is pushing many people to acts of desperation. Is it any wonder that people like Ponce and Amper should see suicide as the only way out of a life of never-ending misery, poverty and pain?

The poor do not want to remain poor forever, to be dependent on government and other people for their day-to-day needs. They would like to work, but there are no jobs for them in the country. The World Bank has estimated that about P30 billion is lost to corruption every year in the Philippines. If this amount could be used to establish industries and livelihood programs for the poor, they could be given some means for their subsistence.

If the billions that are being frittered away in pork barrel to legislators and doled out to national and local officials to ensure their loyalty to the President were used instead to subsidize the schooling and a feeding program for the children of the poorest of the poor, they would have a chance to get some education that would allow them to earn more.

The rich also have a responsibility to improve the plight of their poor countrymen. When will the richest of them emulate the example of Warren Buffett and Bill Gates, and donate a substantial part of their enormous wealth to projects that would make a difference in the lives of their very poor countrymen?

Until both government and the private sector make a coordinated effort to reduce the incidence of poverty and to correct the terrible inequality in the distribution of wealth, people like Ponce and Amper will continue to consider suicide as a way out of the never-ending pain of extreme poverty.


The urgency for real transparency in the domestic oil industry remains despite the recent rollback in oil prices, and vital information needs to be disclosed for the public to be assured that the monopolized domestic oil industry is not profiting at their expense.

According to independent think-tank IBON Foundation, the public has been put at the mercy of the oil firms and their mysterious pricing schemes, and is left to take the oil companies’ word that their prices are fair and their profits reasonable. It enumerated the data that oil firms need to disclose to ensure the public that their welfare is not being jeopardized.

Among others, this information includes: 1) the retail pricing formulas and strategies of the oil firms domestically and as they relate to their foreign mother corporations; 2) the overseas supply sources and the terms and periods of their supply contracts; 3) any payments local firms make to mother firms whether as profit shares, charges for technologies or services, fees and other payments; 4) refinery stocks and capacity; 5) inventories and storage capacity; 6) local sales and distribution to direct buyers, retailers and other oil firms.

While some of this information is already reported or otherwise available, others such as supply contracts have unfortunately been claimed as “confidential” by the oil companies. This information will not just address legitimate public doubts but also be vital in assisting policy makers and legislators in developing responsible energy policies.

IBON believes that the oil deregulation law has clearly failed to introduce effective competition in the downstream oil industry which remains subject to monopoly control and domination by the Big Three oil firms. It has merely allowed the global oil monopolies to freely pass on inflated crude oil prices and given the domestic oil firms license to price as they see fit, at the expense of Filipino consumers. 

Oil is a critical sector with far-reaching impacts on the public welfare and cannot be allowed to operate on a largely profit-maximizing basis, said the think-tank. Real transparency is thus crucial for public interest to prevail


While proponents of the Japan-Philippines Economic Partnership Agreement (JPEPA) claim that the pact will create more opportunities for local nurses by allowing them to enter the Japanese market, a study by a Japanese university shows that foreign nurses in Japan face exploitative work conditions and even discrimination. 
A study by the University of Kitakyushu in Japan found out that employment programs involving foreign nurses and caregivers have resulted in trainees being forced to work long hours. The Japanese government has also refused to guarantee minimum wage levels, while exorbitant fees of at least 58,000 yen (PhP 23,200) are deducted from the nurses’ salaries every month. 
Exploitation of foreign workers on training programs has also been prevalent. Indonesian trainees in Japan , for instance, have reportedly experiencedphysical abuse and been forced to render unpaid overtime, while others have been denied such basic rights as freedom of movement. Meanwhile, non-Japanese in the bigger cities are reportedly subject to racial profiling by being asked to produce their foreign registration cards or passports, which must be carried at all times. 
Part of government’s hype is that with the JPEPA, 400 Filipino nurses and 600 caregivers will be allowed to enter Japan for training for over two years. However, the receiving scheme for health workers states that they must work as trainees in designated institutions, undergo six months ofJapanese language training and pass the national certification tests before they can qualify as nurse or caregiver. Although they are already working during this time they will be receiving pay only as a non-licensed worker or trainee or candidate, or as nurse’s aides and caregiver’s assistants. 
According to research group IBON, senators debating on the JPEPA should see that the inclusion of nurses in the JPEPA is a deceptive provision that offers uncertain benefits, made only to sweeten the blatantly one-sided, pro-Japan deal. Using Filipino nurses as a justification for approving JPEPA highlights how the Philippine government is willing to sacrifice the welfare of its citizens as well as to cover up for its severe failure in generating jobs and supporting the country’s health system. (end) 
The No Deal! Movement for Unequal Economic Agreements in cooperation with the La Sallian Justice and Peace Commission and Benedictines for Peace invite you to the forum ‘JPEPA: Deal or No Deal? The People’s Issues’, 9 am -12 pm, Sept. 12 at the Fajardo Gonzales Auditorium, DLSU Manila. The program includes discussion on the Senate hearings and the presentation of a manifesto on JPEPA.

Mother poisons 3 children then kills self–police

By Abigail Kwok, Niña Catherine Calleja
INQUIRER.net, Southern Luzon Bureau
First Posted 10:04:00 09/09/2008


MANILA, Philippines — A mother killed her three children and later herself through poisoning after midnight Monday in Magdalena, Laguna, police said Tuesday morning.

Chief Superintendent Ricardo Padilla, regional director of Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) Philippine National Police (PNP) and Senior Inspector Raul Sandoval, Magdalena police chief, said Marjorie, 4; Margareth, 3; and MJ, 2 were forced by their mother Janeth Ponce, 32 to drink the bottle of liquid toilet bowl cleaner at their house in Barangay (village) Salasad at around 1 a.m.

Janeth afterwards drank the poison to kill herself.

All four were rushed to the Magdalena Provincial Hospital but the three children were declared dead on arrival. Ponce was admitted to the emergency room but died shortly afterwards, Padilla said.

Sandoval said the suicide note that they found in the victims’ house made them believe that the mother killed her children and herself because of poverty.

In her suicide note, however, Janeth was asking her relatives to take good care of her children.

Police added that the relatives of Ponce refused to subject the mother and her children to an autopsy.

Police will also contact the husband of Ponce, who is a construction worker in Manila.

JPEPA: Deal or No Deal? The People’s Issues

JPEPA: Deal or No Deal? The People’s Issues

Friday, 12 September  2008, 9:00 am to 12 noon 

Venue: Fajardo Gonzales Auditorium, 18th floor, Bro. Andrew Gonzales Hall, 
De La Salle University (DLSU) Manila 



Opening Prayer                                                                               Benedictines for Peace


National Anthem


Welcome Remarks                                                                         Bro. Bernard Oca FSC

                                Vice-Chancellor for Lasallian Mission and External Relations


Message                                                                     Vice President  Teofisto Guingona


Speakers’ Presentations


JPEPA: An Overview                                                                  Mr. Sonny Africa

                                                                                                IBON Foundation, Inc.


State of Play at the Senate                                                          Mr. Arnold Padilla

                                                                                                 NO DEAL! Movement


Reactors                                                                                      Dr. Leah Paquiz

President, Philippine Nurses’ Association


                        Mr. Clemente Bautista

                                              Coordinator, Kalikasan-People’s Network for the Environment


Open Forum


Response from Senators                   

Formal Presentation of Manifesto to the Senators

Closing Remarks                                                                              Mr. Emmanuel Garcia

      Cluster Coordinator, LJPC Luzon-Central



As inflation in the country rose to its highest in nearly 17 years, independent think-tank IBON Foundation says that while unavoidable, inflation could have been moderated if government had not insisted on taxing the people through the oil value-added tax (VAT).

The National Statistics Office reported that high fuel costs drove the inflation rate to a 12.5% high in August. According to IBON, the removal of VAT on oil would have immediately brought down the cost of fuel prices by 12 percent. Pump prices are estimated to go down by P4 a liter and liquefied petroleum gas (LPG) by P60 per 11-kg cylinder without the VAT on oil. These could have brought immediate relief to millions of Filipinos through savings on their fuel bills, while bringing down production costs of fuel-intensive establishments.

High prices of commodities could also have been mitigated if government had not surrendered control over the oil industry by maintaining oil deregulation.

Inflation bears most heavily on the poor who already struggle with record joblessness and falling incomes. But government continues to implement the VAT in its obsession to reduce the budget deficit and continue servicing its public debt. For the people, however, all these have only meant higher prices and drastic cuts in income, consumption and welfare.


As Sen. Miriam Santiago advises opposition senators to “love or leave” the Japan-Philippines Economic Partnership Agreement (JPEPA), research group IBON Foundation urges the Senate to choose the non-ratification of the deal and help reclaim the country’s economic sovereignty.

Even as Santiago warned senators that renegotiating the treaty would mean wasting one year’s worth of Senate time and resources, IBON said that the long-term consequences of lost policy sovereignty are severe and will cement Philippine backwardness.

The group added that the non-ratification of the Japan-Philippines Economic Partnership Agreement (JPEPA) will send the signal that the country is after trade and investment cooperation that is of mutual benefit and will reject deals that are unequal and destructive. It is more advantageous for the country to have less investment at better terms rather than more investment but foregoing the most important benefits.

Rejecting JPEPA also challenges the Japanese government to prove that its official development assistance(ODA) is given to support development as Filipinos see it and not to influence domestic economic policy-making to serve Japanese corporate interests.

Even with the exchange of notes between the Japanese and Philippine governments, the JPEPA signed by the Arroyo administration remains unequal and defeatist. The Philippine Senate can be at the forefront of rejecting this destructive deal and take the first step in upholding economic sovereignty and national development, the think-tank said. (end)

IBON is a convenor of No Deal! Movement Against Unequal Economic Agreements.