The Oil Drum

Protests and strikes against rising fuel prices are already afflicting Italy and Britain (though the Italian situation may be due to some hardball political manouevring by Silvio Berlusconi), and now Papua New Guinea is experiencing a backlash against price rises by the local fuel distribution monopoly. One more example of the effect of peak oil on developing nations.

The National has an editorial denouncing "Oil baron sabre rattling" and blaming the government for being "powerless" (which to be fair it is - it might be stupid granting a distribution monopoly, but the PNG government has no influence over international oil prices whatsoever).

ORDINARY people are asking one question today – how is it possible for our Government to be dictated to by a foreign-owned oil company? And there are a few other questions that might be asked. Among them is the issue of the Papua New Guinea economy. The press releases surrounding this stand-off have been riddled with the phrase “we have no other option”. As soon as readers see that time-honoured karamap, they know that a price rise will follow.

In fact, large oil monopolies such as InterOil have many other options; they are less attractive perhaps than publicly demonstrating that it can dictate to the PNG Government the terms and conditions under which the latter can access oil supplies for its people. Our governments in recent times have been fond of flexing their muscles over arguably small issues to show that PNG has international clout and is a developing country to be reckoned with. Now faced with a real challenge to its authority, the PNG Government is apparently powerless to act. They “have no option” but to give in to the oil company demands. So now we move one step further down the ladder.

What commercial sectors of our economy are likely to be worst affected? The trucking and transport industry and the retailers.

"The increasing fuel prices will cripple our operations," a trucking firm executive said. They have already responded to the rise by sending their clients notice of a 15% rise in freight charges. That would be regarded as a hefty increase overseas and particularly in developing countries. And then comes the inevitable: "We are not able to bear the increase ... and will have to pass it on to our clients." A major food producer echoed the same sentiments, saying that his firm had been left "with little choice" but to increase the cost of their goods. He predicted a rise in the cost of bread and biscuits and noted that the price of wheat "had already increased".