Bahamian Consumers and oil and gas prices

Consumers and oil and gas prices

 

 

By Charles Fawkes

Nassau, Bahamas

fawkesmore@mail1.coralwave.com

HOUSE OF LABOUR: The price of oil and gas will continue to remain high in the coming months because the oil companies locally and on the international scene will continue to manipulate the oil market- (whether it be because of the war in Iraq or whatever)- creating artificial shortages in order to "jack up" prices to make huge profits.

They will blame ravenous global demands and petroleum producers' reluctance to boost supplies. They will also blame security problems in Saudi Arabia and Iraq claiming that these problems have inflamed the market. They will also blame the Organisation of Petroleum Exporting Countries (OPEC) and any event they can latch on to.

Recently, June delivery for crude oil rose 77 cents on the New York mercantile exchange to $38.98 per barrel, a new 13-year high, while unleaded gasoline for June delivery gained 4.4 cents to $1.31 per gallon, the highest settlement since the contract started trading in December 1984. June heating oil climbed 2.02 cents to settle at 98.81 cents per gallon. Natural gas futures climbed 3.8 cents to settle at $6.269 per 1,000 cubic feet. Increases in oil and gasoline futures typically cause pump prices to rise. Refineries are running flat out ahead of the peak summer driving season, but costlier crude makes it more expensive for them to produce gasoline. The average price of regular unleaded gasoline in the United States is $1.84 per gallon, according to the Energy Department, and analysts say the cost could rise as high as $3 per gallon in some regional markets.

Additionally, contracts of North Sea Brent crude for June delivery soared by $1.30 to $35.78 per barrel in late trading on London's International Petroleum Exchange. Markets rose after the U.S. ambassador to Saudi Arabia, the world's No.1 oil exporter, advised Americans to leave the country following the killings of five foreign workers at a petrochemical plant there.

The Organisation of Petroleum Exporting Countries, which pumps one- third of the world's oil, has reaped a windfall from higher crude prices. OPEC insists that it aims for an average target price of $25 per barrel for its benchmark blend of crude, but the actual benchmark stood 37 per cent higher than this at $34.13 on Monday, May 17, the most recent day for which OPEC complied data. OPEC blames high prices largely on speculators and political tensions in the Middle East.

Locally, gas prices in January stood $2.93 per gallon. With the current manipulation of the market this could rise to $3.30 in Nassau and as high as $3.42 in the family islands

The price of no other commodity is as directly and critically linked to the cost of living as the price of petroleum products, especially gasoline and diesel oil. So much so that the present struggle of the multinational petroleum companies in The Bahamas, for hefty increases in gas prices, begs a historical perspective and review.

Until the 1960ís, the industrialised countries had a cheap and plentiful source of oil from their former colonial territory until these, now independent, countries became wise as to the degree their most valuable resource, oil was being exploited.

In 1960, 13 of these oil-producing nations who depended largely on oil exports for their income and trade got together and formed the Organisation of Petroleum Exporting Countries (OPEC). The members of this organisation supplies about 85 per cent of the oil imported by non-member nations and have a major influence on the petroleum industry globally.

Among other things, the organisation influences prices and set production quotas for its members to maintain their desired per barrel of oil. Over night the price of a barrel of oil went from a couple of dollars to as much as $50 per barrel and now fluctuates around $12-$15 per barrel depending on the grade.

Those of us old enough can remember this economic shockwave felt globally by this sudden increase in the price of oil. Many small nations' economies virtually collapsed a disaster from which many will never fully recover. There were severe shortages of gas worldwide and its price skyrocketed. This was also accompanied by sharp increases in the process for all other goods and services. The cost of living also went through the roof.

In The Bahamas, we have vivid memories of the gas shortage at the time and the long lines at the stations when gas was available. The sharp increase in the price of gas was only held partially in check by the then government, which instituted controls on its price.

This was the beginning of the adversarial relationship that exists between the multinational oil companies and the government in The Bahamas. The companies want to extract as much as they can from the Bahamian consumer and the government, exercising controls, should be protecting the consumer from their exploitation.

The oil crisis of the 60's offered the perfect environment for the multinational oil companies like British Petroleum, ESSO, Shell and Texaco, etc., to demonstrate their greed. We must remember that even though the members of the OPEC demanded a fairer price for their oil, they lacked technical skills and experience to extract the oil, refine it and market it. So they were forced to rely on the multinational oil companies for their expertise. The multinationals became, in fact, the middlemen.

The oil companies seized this opportunity to manipulate the oil market creating artificial shortages and hiking up the price in order to make huge profits. To divert attention from their activities, they used their unlimited public relations resources and their government influence to shift the blame to OPEC. The result was billions of dollars in windfall profits for the oil companies. Even a nation as powerful and sophisticated as the Untied States finds the multinational oil companies formidable foes to regulate and control. The tactics they have used in The Bahamas in recent months to extract increases in the price of gas, demonstrated that they have not changed in character. As small and relatively unsophisticated as we are, compared to the United States, what chance do we have against them?

The local oil companies are brazenly attempting to manipulate public pressure on the government for further increases. The pressure being applied is close to blackmail. They may even threaten to cut back on their inventory of gasoline and diesel oil, which would create an artificial shortage on the islands.

The stakes are high for the Bahamian worker because the level of his quality of life is threatened. The Ministry of Trade and Industry, although, granting the recent request for increase have in the past insisted that the companies absorb some of the increased cost in their 33 and 44 cents margins. According to the Nassau Guardian, Minister Leslie Miller also suggested that both petroleum distributors and retailers being absorbing some of their increased costs in the 33 and 44 cents respective margins enjoyed by each.

"What we are trying to tell them is instead of putting all this in the Bahamian people, with their 33 cents and 44 cents, it's time they take some hits," he said. "Your margins will get cut down in half anyhow. Thank God you have these margins still in place for the next month come June they will be dealt with."

Consumers in the meantime are waiting anxiously to see if Minister miller can reduce the prices of gas as he has promised to do with the setting up of a National Energy Corporation and the purchase of supplies from some regional oil producers.



Charles Fawkes is the President of the National Consumer Association and organiser for the Commonwealth Group of Unions, Inside Labour columnist for the Bahama Journal, Editor of the Headline News, The Consumerguard and the Worker's Vanguard. His e-mail address is fawkesmore@mail1.coralwave.com

He can be contacted at his office in the House of Labour at 1-[242] 326-6620.


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