Oil prices down around the world

Published April 29, 2020, 12:00 AM

by manilabulletin_admin

E CARTOON APR 30, 2020The 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.