Engaging the world’s biggest oil cartel

ON June 9, 2020, as the Filipino nation trembled in fear because of the continued rise in the number of confirmed cases of the deadly Covid-19, Filipinos got another beating when fuel products registered another round of big-time price hike.

As an economics graduate, and given my experience in business planning and marketing, including my other involvements in policy decisions as chairman and director of business and industry organizations, I still have to understand the rationale behind the move to raise fuel prices amid low global demand for oil because of the Covid-19 pandemic. I find the timing of the oil price increase surprising, if not suspicious.

Raising fuel prices in the midst a low global demand for oil contradicts the fundamental economic principle that when supply exceeds demand, prices fall, and when demand exceeds supply, prices tend to rise. Increasing oil prices amid a depressed global demand for oil does not make sense at all to me.

However, an earlier report I read in one of the newspapers that the Organization of Petroleum Exporting Countries will reduce its daily oil production output because of low oil prices in the global market confirmed my fear that, indeed, the world’s oil trade is controlled by a cartel. Remember that manipulating the supply and production of oil to create artificial shortage and to raise prices is the handiwork of a cartel.

The doctrine of supply and demand is one of the most important concepts in macroeconomics. I am afraid that the recent spike in oil prices could have been manipulated and not market driven, despite assurances from some sectors that this is influenced by oil prices in the global market. To me, this is part of the manipulative control of a cartel, which is even announced globally.

What worries me is the deafening silence confronting the world’s controlled oil trade. For a small, economically struggling and imported oil-dependent nation like the Philippines, shouting out our pains and sufferings due to the manipulations made on oil prices may just be ignored by the world’s biggest oil cartel members.

But how about the world economic powers like the United States of America, which is also an oil producing country and a frontrunner in consumer protection, and oil rich Russia, why are they so quiet about the erratic, if not orchestrated, movement of oil prices in the global market?

If these powerful nations can impose economic sanctions to avoid a disturbance in the world’s economic landscape, why can’t they do that to oil rich cartel member nations?  Unless they are also part of the cartel.

The fact that the world seems helpless under the manipulations of the world’s biggest oil cartel saddens me. As a consumer advocate in the Philippines, in my own small way, I filed an anti-cartel case against the Liquefied Petroleum Gas Marketers Association. The first anti-cartel case in the country to be given due course by the court where warrants of arrest were issued against the respondents.

My biggest fear, though, is the fact that unless the world’s biggest oil cartel is tamed of its manipulative tendencies, it will continue to dominate the global oil trade. And with oil being the Philippines’s major energy source for its power, transportation and business industries, the lives of Filipinos and the rest of the world will virtually be at the mercy of the world’s biggest oil cartel. After all, power is the heart of the economy, as proclaimed by my cohost in the radio program “Dito sa Bayan ni Juan,” former Senate President Juan Ponce Enrile.

Dr. Jesus Lim Arranza is the chairman of the Federation of Philippine Industries and Fight Illicit Trade; a broad-based, multisectoral movement intended to protect consumers, safeguard government revenues and shield legitimate industries from the ill effects of smuggling.


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