Rajpal's Column

4th June 2000

Shell of a lot of excuses by a gas giant

By Rajpal Abeynayake

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The Shell gas price escalation is the rudest, most obnoxious act of a multi-national in the whole Asian region in recent memory. Smart boys of all types have appeared on television and tried to explain away in various terms last week's price leap ( which makes the January-June price increase a 62 per cent increase ) with puerile fibs and constructions.

First thing is, the Shell price hike is serious, and it's a serious indictment on the government's policy of allowing sporadic price increases in goods and services, under cover of various extraneous factors.

But, Shell's contentions are all so vapid that they beg to be taken on first. First, Shell seeks to justify the recent obnoxious price increase, the third or fourth in a matter of months ( we have lost count ) by trotting out the usual. It's the gall with which Shell does it that's the biggest indictment on a government that seeks to be totally impotent in the face of Shell's audacity.

Shell is a serial violator of market decency. Whatever the reason for the price hikes ( world oil prices etc., etc, ostensibly) , there is no excuse for the serial price hikes in any domestic consumer market. If (that's a massive if ) there were global imperatives that were 'forcing' Shell to increase prices of gas, the increases should have been done in one go, with a rationalized pricing operation that would have taken account of all current and prospective pricing factors.

In other words, this sort of price increase by installments will not be done by even the pond scum operators, say, in a Maligawatte hole in the wall dhal shop.

The government which holds 49 per cent of the company, is obviously a party to this blatant price assault on the masses (.. and to think that all this is from a political dispensation, which, led by Sirimavo Banda–ranaike in the sixties, sent Shell packing out of this country in a memorable act of defiance.)

But, let's take Shell's brand of bare faced nonsense head-on for a change. Shell Gas Lanka is a subsidiary of the Royal Dutch/Shell Group and was formed when the group acquired the assets and infrastructure of Colombo Gas Company for USD 37 million, under a government privatisation programme. Now, this so called Royal Dutch /Shell is a company that posted a 118 per cent jump in first quarter earnings this year, as the combination of restructuring and higher energy prices buoyed the company — the third largest publicly traded oil and gas company of the world. (Royal Dutch Shell's own sources stated that the current cost-net income, a standard measure of oil company profitability, rose to USD 3.13 billion - by 118 per cent -- in the quarter ended March 2000. )

It's this same company whose subsidiary Shell Gas Lanka, which now seeks to pauperise the Sri Lankan consumer by the recent obscene price increase and whose details are referred to elsewhere in this newspaper.

How does a subsidiary, particularly a subsidiary of a company which is earning profits of such a tangible nature, justify a serial price increase, and talk of 'world price increases and losses?' It may be another matter that stands alone, the Sri Lankan Shell operation is 'losing'; but a company which is overall making a killing, has a moral obligation to at least desist from making the kind of serial price increases that Shell has made here. (And don't 'global factors' ring hollow for a company that is globally making stupendous profits anyway?)

Shell's rapaciousness, and the government's rank duplicity in the process, needs to be exposed for very simple reasons. It's not Shell alone, but a government that has shares in the company, that is responsible for the serial price increases which will place immense hardships on the masses. Shell and its slick boys contend that the oil price increases are predicated by global factors, which make price increases inevitable.

That's really slick. The fact is that Shell has cut prices before, for instance, in Argentina ( in the second such move by a oil firm in March this year.) Responding to the Argentine government's pressure for lower prices, fuel prices were cut on Wednesday March 23rd 2000, between 1.5 to 3.00 cents per litre, implying 1.8 to 2.8 rebates. The move came after a Centre Left Alliance government of President Fernando de La Rua, pressed for lower fuel and public services prices to soften the impact on consumers of a tough tax hike. While the Argentine Centre Left Alliance applies pressure for prices to be reduced, our own Centre Left Alliance connives in serial price increases, which shows how badly our own dispensation has caved into multi-national dictates.

Shell's record for rapaciousness and political incorrectness has also typically been perhaps one of the most obnoxious in recent times. Royal Dutch Shell, to take one telling example for instance, refused to pay compensation to forced labour in the Shell company during the war, saying 'forced labour had been a result of the Nazi control of the firm'. The oil giant simply said that 'the company itself had no control over the firm, and that it was regarded as an enemy company' by the Nazis! Again, quite glib, coming from company that makes such cool profits.

Besides, Shell is a player in all the frontier oil operations, both within and without the Middle Eastern oil quagmire. That's hardly an atmosphere in which Shell can be seen to be a 'loser' in its global operations, necessitating strangulatory price increases on consumers. Shell for instance won the deal to develop Iran's Soroush and Nawaz oil fields. The new Cazakastan and Novorossilik oil pipeline which resulted from an accord between members for the Caspian Petroleum Corporation, was funded by Shell among other companies. Now, Shell may give a gazillion reason why all these sanguine projections don't impinge on our serial gas price increases. Obviously, Shell will be talking nonsense.

While Shell is a serial offender as far as price increases are concerned, the government is a multiple offender, increasing or condoning the increases of prices of electricity and telephone tariffs, gas and water, all in the space of two working days. For most Sri Lankans, however simplistic that sounds, this is looking like the real crisis since independence.

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