The world’s oil producing nations led by Saudi Arabia and Russia reached agreement last Easter Sunday on a record cut in their output to prop up world oil prices which were down because of the COVID-19 pandemic.
Saudi Arabia, leader of the Organization of Petroleum Exporting Countries (OPEC), and Russia agreed to end the rivalry that had prompted them to unduly raise their production. The dispute triggered a price war that led to a flood of supply just when world demand was being crushed by the pandemic.
Because the pandemic had shut down most of the world’s industries, global oil demand had fallen by around 30 million barrels per day. With so much supply available in the world market, prices fell to $20 per barrel. It was at this point that United States President Donald Trump stepped in to ask Saudi Arabia and Russia to end their dispute. They agreed to cut their production, with the goal of cutting the global supply by 20 percent.
Unfortunately, however, the pandemic has reduced the demand for oil to such low levels that the OPEC-Russia agreement proved useless in keeping oil prices steady. Prices continued to fall and in one trading day, there was a point where pricing for US crude hit negative territory for the first time in history.
The current low world prices of crude oil are reflected in the low prices of gasoline, diesel, and other oil products in Philippine gasoline stations. But not many can take advantage of the situation because the lockdown in Metro Manila has kept most cars off city streets.
The Department of Energy ordered the Philippine National Oil Co. to begin planning for a government oil stockpile program. But there is no funding for the project. It seems the Department of Energy was given its budget for the first and second quarters, but not yet for the third and fourth quarters. It cannot, therefore, carry out its plan to build up a strategic petroleum reserve, Director Rino Abad of the DOE Oil Industry Management Bureau said.
An oil stockpile would be a good idea not just for the Department of Energy but for all government agencies, particularly those involved in programs requiring considerable energy, such as the Department of Public Works and Highways and the Department of Transportation.