Deregulation of the oil industry
Collusion between the imperialists, the oil cartels and the reactionary government

Basahin ang artikulong ito sa Pilipino

Since April this year, Petron, Caltex and Shell have been raising the prices of petroleum products month after month. On September 30, prices were increased by 40 to 85 centavos per liter. The day after, Caltex and Shell added another 42 centavos. This latest increase led to a 20% hike in the minimum fare for jeeps and buses and a whirlwind rise in the prices of prime commodities.

It was in July 1994 when the International Monetary Fund (IMF) ordered the Ramos regime to deregulate the oil industry as a condition for a $650 million loan. The government was given until 1997 to put this into effect.

Full deregulation was implemented in February 1997.

The government�s rationale: deregulation would supposedly smash the dominance of the three leading oil companies in the country, the so-called �Big Three�: Petron Corp., Caltex Philippines Inc. and Pilipinas Shell Petroleum Corp. The Ramos regime claimed that deregulation and incentives such as tax holidays would encourage other oil companies to come thus resulting in free competition. Eventually, this would eliminate the domination of the �Big Three�. Prices of petroleum products would drop as a result of competition.

The people know very well that the opposite took place. That same year, the �Big Three�s� combined profits reached P38 billion. Instead having their dominance undermined, Petron, Caltex and Shell�s monopoly control over the local oil industry has been further entrenched.

Protests resounded. The people�s resistance culminated in the �Lakbayan ng Mamamayan Laban sa Kahirapan at Imperyalistang Pandarambong�, a big march-rally in October 1997 joined by more than 20,000 people from Metro Manila, Central Luzon and Southern Tagalog. The rallyists condemned liberalization, deregulation and other policies that contributed to the people�s impoverishment.

The first deregulation act was amended and the passage of a new law, RA 8479, or the new Downstream Oil Industry Deregulation Law, was railroaded that same year. The oil companies never had it so good. According to the Securities and Exchange Commission, profits of the �Big Three� zoomed by 1,090% in 1998!

Despite deregulation, Petron, Caltex and Shell still hog 96% of the sales of all petroleum products in the country. The three giant companies control up to 3,000 gasoline outlets nationwide compared to 30 owned by new companies, the so-called �new players�.

Far from having their hands tied due to deregulation, the �Big Three� have further secured their business interests and strengthened their positions within the industry. (see box)

Oil glut

Oil companies persist in raising the prices of petroleum products despite a long-existing oil glut that has led to the long-term trend of falling crude oil prices in the world market.

The trend has been evident since the second half of the �70s as a result of political, economic, military and diplomatic measures taken by imperialist countries and the oil companies to undermine the control of the Organization of Petroleum Exporting Countries (OPEC) over the supply of crude oil. Added factors have been the discovery and development of alternative energy sources and energy-efficient motors and the maximization of old oil wells in Western countries. Besides this, oil was also discovered in the North Sea and Russia has been encouraged to dump ever-bigger supplies of crude in the international market.

Within the framework of this long-term trend of falling crude oil prices are temporary fluctuations due to changes in seasonal demand, the flaring-up or cessation of disturbances (such as wars) in the Middle East (and even in the Balkans, the former Soviet Union and Afghanistan) which produces most of the world�s oil, and the short-lived unity of OPEC members.

The latter took place in April when OPEC decided to cut production by two million barrels to jack up the price of crude. However, OPEC is only able to prevail temporarily. Major hikes in the prices of crude oil have not been sustainable. In fact, crude oil prices in the world market have already begun dropping in the first half of October due to the refusal of some OPEC members to abide by the decision to cut production and because there are other countries like Russia that are not OPEC members but are capable to producing large quantities of crude. Besides, crude oil production, even in OPEC countries, is also controlled by the oil monopolies.

Oil cartel

Despite falling prices of crude, the oil monopolies have been raising the prices of petroleum products in connivance with the IMF and reactionary governments.

With the oil giants and other monopoly capitalists controlling multilateral agencies such as the IMF, World Bank and World Trade Organization, it is no surprise that the policies being pushed by these agencies, such as deregulation and liberalization, all conform to, and serve, the interests of monopoly capital.

The local reactionary government serves as monopoly capital�s instrument in ensuring that pro-imperialist policies are enforced in the country. In fact, the deregulation bill was approved, if not drafted, by the oil companies. Mario Tiaoqui, a former Petron official who is now Secretary of the Department of Energy under Estrada, serves as spokesman for the �Big Three�. The Energy Department itself was created to oversee the process of deregulation.

In the Philippines, the �Big Three� that conspire to raise the prices of petroleum products comprise the local oil cartel.

Also a part of this cartel is the reactionary government, which rakes in a lot of revenue from taxes imposed on petroleum products. Forty-seven percent (47%) of every peso shelled out by a consumer for regular gasoline, 20% for diesel and 9% for kerosene accrue to the government as specific taxes�the cost of which the oil companies duly pass on to consumers.

On top of this, the �Big Three� have been brazenly cheating on their taxes to avoid a cutdown in profits. Hundreds of millions of pesos worth of tax credit certificates issued to other companies have reportedly been used illegally by the oil corporations to escape paying importation dues.

With the immensity of their annual profits, the �Big Three� are among the top 1,000 corporations not only in the Philippines but also in Asia.

In reality, their actual profits are far in excess of what they have declared due to their practice of �transfer pricing�. Through �transfer pricing�, the oil companies overstate the cost of importing crude oil and other items from their mother companies overseas in order to understate their declared net incomes, avoid paying the appropriate taxes and rationalize successive oil price hikes.

The �Big Three�s� criminal conspiracy and insatiable lust for profit are but extensions of the practices of their mother companies that belong to the powerful international oil cartel.

In the Philippines, members of the local cartel have reduced by 25% the amount of crude oil they have been refining upon orders of their mother companies. Pilipinas Shell has cut production by no less than 20,000 barrels per day; Petron Corp. by 25,000 barrels; and Caltex Philippines by 10,000 barrels to induce an artificial shortage and jack up the prices of petroleum products.

Pilipinas Shell is a subsidiary of Royal Dutch Shell, the world�s biggest oil company before it was overtaken by Exxon-

Meanwhile, Petron is 60% owned by Aramco, the world�s biggest producer of crude oil. Aramco is in turn 60% owned by Texaco and Standard Oil of California (Socal), the first company to extract oil in the Middle East. Secondary investors in Aramco are Exxon and Mobil. It was only in 1975 that the Saudi Arabian government acquired 40% ownership of the company.

The Government of the Republic of the Philippines maintains a 30% share in Petron, making it still a favorite milking cow of bureaucrat capitalists.

Further monopolization

The trend of falling crude oil prices has led to a more vicious struggle in the world market. The oil giants are now engaged in a mad scramble, looking for ways to cut down on expenses, especially labor costs. The path inevitably taken: mergers involving the biggest oil corporations that have resulted in reduced workforces.

If there used to be seven oil companies comprising the international oil cartel in the �70s (the so-called �Seven Sisters�), today, there are only three: Exxon-Mobil, Royal Dutch Shell and British Petroleum-Amoco.

In 1998, Exxon and Mobil merged to form the biggest oil corporation in the world. That same year, British Petroleum (ranked 18th in the list of oil companies worldwide) and Amoco (54th on the list) merged to form BP-Amoco. After this, BPAmoco acquired last May the US-based Atlantic Richfield Co.

The British Petroleum-Amoco merger is expected to result in cost cutdowns of up to $2 billion by 2001. Half of this will be due to the loss of 6,000 jobs. The merged company is also expected to save $250 million from acquiring the power to force suppliers to sell it crude oil at cheaper prices.

Another merger is looming, this time between Chevron and Texaco. When this is realized, it will have been the fourth merger among the oil giants in the past 11 months.

On the other hand, even as the fall of crude oil prices is expected to be a continuing trend, a shift is likewise being anticipated with the forthcoming depletion of oil deposits in the Middle East. Thus, the oil giants are in a fervid rush to launch exploration projects in order to establish control over the oil deposits in Central Asia and other areas.

The enormity of the capital needed to extract crude oil from the ground and transport it to the West is another factor behind the oil companies� mad scramble to merge and pool their resources.

For now, Exxon-Mobil holds the oil exploration contracts in Azerbaijan (in Central Asia) and Chad (in Africa). It is the race to control the Central Asian oil deposits that lies behind ethnic strife in the region as well as local conflicts in the Balkan Peninsula and Africa, all of which are incited and provoked by monopoly capitalists. Monopolization, barefaced and unbridled, predominates the face of the earth along with all its attendant abuses.

Under these circumstances, deregulation means no less than giving free rein to monopolization and conspiracy among giants, and the encouragement of all manner of abuse, the worst and most brazen of which take place in backward countries like the Philippines. And the overall consequence�in both industrialized and underdeveloped countries�is the further entrenchment of monopoly. The unconcealed abuse of monopoly power, brazen profligacy in the midst of widespread poverty and the shameless obsequiousness of, and coverups perpetrated by, the puppets in government�are at the core of the masses� intense reaction to and anger at, repeated oil price hikes.

The international capitalist system has reached the monopoly stage and will never revert to the period of �free competition� as what the drumbeaters of deregulation and liberalization claim.

The only solution is to advance the people�s democratic revolution to break the chains of exploitation and slavery at the hands of foreign monopolies and the local ruling classes.

Upon victory, basic and strategic industries, including the oil industry, shall be nationalized. In particular, the democratic coalition government shall take charge of capitalization and oversee the processing, distribution and marketing of oil. Thus, oil importation shall be centralized to guarantee a stable supply, stop �transfer pricing� and ensure that the fuel is obtained under conditions and prices that are acceptable. The people�s government shall persevere in discovering and creating alternative sources of energy. The state shall oversee the discovery and exploration of oil deposits within the country instead of leaving this in the hands of foreign corporations.

All this can be realized only under a revolutionary people�s government that advances the welfare and interests of the people and the development of society.

00 September 1999
English Edition

	Editoryal: The workers� militant struggle is gaining breadth and strength
	Ang Bayan, online
	Rallies and strikes on November 16: Intensifying struggle for a P125 wage increase
	Deregulation of the oil industry Collusion between the imperialists, the oil cartels and the reactionary government
	A Letter From The Ilocos-Cordillera Region
	On the issue of secession and the Moro people�s right to self-determination
	On the 50th anniversary of the victory of China�s democratic revolution
	On the 50th year anniversary of victory of China�s democratic revolution The enslavement of workers in China
	On the 50th year anniversary of victory of China�s democratic revolution The socialist transformation of the countryside and its reversal
	Filipino people congratulate the East Timor people and condemn attacks on them by Indonesian fascists
	Marking the renewed advance of anti-feudal struggles in Southern Tagalog Initial gains in eliminating resikada
	Tactical offensives continue in Bicol
	News