Softening

We have had four weeks of oil price rollbacks. Although oil prices firmed up a bit the past few days, the general trend appears to be a softening of oil prices into the foreseeable future.

The downward drift of oil prices was largely unexpected. The large hedge funds bet on higher oil prices and began speculating on futures. OPEC+ maintained production cuts aimed at keeping prices up.

Broader market trends, however, dictated a softening of prices.

The industrial economies, particularly China, have been flagging. Several European economies are technically in recession. Despite the seasonal uptick in oil demand during the cold months in the northern hemisphere, the global market remains oversupplied.

The price spike in the preceding months was due largely to the US refilling its strategic petroleum reserves. Those reserves have generally been filled up, reflecting in a general easing of global market demand.

At prevailing price levels, it is still profitable for companies using fracking to extract oil. That is a plus on the supply side.

The European Union is strictly maintaining its $60 per barrel cap on Russian oil exports. The goal is to prevent the Russians from exploiting the high oil price regime to cover the costs of her war against Ukraine and finance her flagging domestic economy.

Once dismissed as marginal, renewable energy sourcing is beginning to make a dent on the overall demand picture. The shift to electric vehicles has turned out to be more dramatic than earlier expected. Existing nuclear plants have been recommissioned after the oil price shock following the Russian invasion of Ukraine.

Over the last few weeks, market players have become convinced that Israel’s war against Hamas is not about to explode into region-wide turbulence. Although most industrial nations have enforced sanctions against Iran, the oil producing country continues to export oil mainly to India and China. While oil prices were high, restrictions on Venezuela’s oil exports were relaxed.

The wave of inflation that swept most of the world’s economies restricted spending on fuel as families focused more on food. That wave is continuing, despite signs indicating the onset of a weak recession.

We are not seeing a growth explosion in the foreseeable future. With the high interest rate regime in place, the monetary brakes will continue to be applied on growth well into next year. This means there will be no spike in oil demand.

The softening in oil prices we are currently experiencing will help moderate inflationary pressures. It will certainly bring some relief for consumers.

But it must be clear in our minds that this softening in oil prices comes about because the entire global economy is flagging.

Short-changers

There are other scourges that energy consumers have to contend with. The most usual is short-changing by dealers of liquified petroleum (LPG) products.

Consumers do not usually have the means to check the actual contents of LPG canisters. We rely on trust that the canisters of gas delivered to our households contain the specified volume. Sometimes, however, they run out too soon.

Because of the nature of the commodity and the manner it is delivered to households, short-changing has been a rampant practice. Sometimes retailers continue to use substandard or damaged containers for the product, endangering consumers.

Relief might be on the way. Police Major General Romeo Caramat Jr., head of the PNP-CIDG, committed to maintaining a closer watch over the LPG retail businesses. Republic Act 11592 provides clear guidelines for retailers to ensure the safe and proper distribution of LPG products. As in most other things, the problem has always been weak enforcement.

The DOE and the major LPG distributors have long waged a campaign to protect consumers from unsafe products and dishonest business practices. LPG retailers need to be properly accredited and intermittently inspected to ensure fair and safe business practices. But those monitoring the industry do not have police power. They have long sought the support of the PNP in enforcing safeguards against unscrupulous businessmen.

Shortly after General Caramat committed to closer policing of the LPG business, a CIDG team raided a large warehouse containing LPG canisters and unregistered equipment for refilling them. The raid was conducted by the CIDG Anti-Fraud and Commercial Crimes Unit led by Police Colonel Bernard Lao.

The raid was commended by former congressman Arnel Ty of the LPG Marketers Association. He has long been campaigning for sustained police support to clean up the ranks of LPG retailers in order to protect consumers and ensure public safety.

The renewed interest of the CIDG in policing the LPG business should be good news for consumers. The business has long been plagued by short-changers and the persistent use of substandard canisters. This has been a curse on the public.

There are thousands of small LPG retailers in the country. The entire police force, not just the elite CIDG, should be involved in fraud detection and prevention. A campaign to clean up this business ought to begin with educating the police rank and file about the LPG Law and the nature of fraud involving small retailers. This cannot be a successful campaign unless each policeman is properly educated about how consumers are cheated by the unscrupulous.

LPG is no longer the cheap energy source it once was. A kilo short-changed to the unwary consumer adds up.

The LPG industry is also a major source of revenue for government. Poor monitoring and weak enforcement will eventually translate into less revenue collection.