By Nepomuceno Malaluan*

(The article first appears in the Yellow Pad column of the BusinessWorld, Vol. XXI, No. 234 on Monday, June 30, 2008. It is based on the author's comments delivered during the DRTS Forum on Oil and Power.)

We consumers are all feeling the pinch of rising prices. For May 2008, the inflation rate year- on-year shot up to 9.6%, compared to 2.4% last year. Such drastic increase has been due in large part, directly and indirectly, to the rise in petroleum prices and the high cost of electricity.

Directly, as a commodity group, inflation for fuel, light, and water was 8.2% in May 2008, compared to 4.0% last year. Indirectly, rising energy prices have driven the prices of major commodities upward. Inflation for services was 7.8% for the same period, compared to 1.9% last year. More severely, inflation for food, beverages, and tobacco shot up to 13.7% for May this year, from 2.6% last year.

The poor among us must be feeling the pinch more intensely. For the 4.6 million families (representing 28% of total families) earning under P60,000 per year or under P5,000 per month in 2003, between 6.5 and 7.5% of their expenditures went to fuel, light, and water, compared to 6.0% for the 2.3 million families (14% of total families) earning over P250,000 per year.

by Walden Bello

Speech delivered during the Development RoundTable Series Forum on Oil and Electric Power held at the Sulo Hotel on 17 June 2008

Our dependency on oil has never been more excruciating than it is today.   The price of fuel has reached unheard of heights.  The price of crude went above $139 a barrel over a week ago, before easing.  At the pump, the price of unleaded gasoline has gone beyond P56 and diesel above P49.  We are now consuming over 120 million barrels a year, and 90 per cent of that is sourced outside the country.

What is causing this unprecedented rise in global oil prices?  The key factor seems to be that the demand for oil is rising much faster than its supply, and this is due fundamentally  to the fact that the few old oilfields on which the world relies for most of its oil are being depleted and no new fields have been discovered that can match their production and reserves.  Peak oil, which was viewed just a few years ago as a outlandish theory, is now being treated as fact.  The second factor pushing up prices is the rush to buy oil futures contracts, a development that is partly determined by the fear that available oil will increasingly become scarce, partly by the desire of investors to park their wealth in oil instead of the declining dollar.

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