Position paper on the low and falling oil prices and its impacts on OFWs in the Middle East

The Trade Union Congress of the Philippines (TUCP) as a national labor center in the country is deeply concerned about the possible negative impacts of the falling oil prices on the jobs of our OFWs which according to experts will remain low in entire year of 2016.  The prices of oil in the world market have continued to fall when it hit around US$30 per barrel in January 2016 amidst overproduction and oversupply.  Meanwhile many countries such as China which traditionally are the biggest consumers of oil are now facing slow economic activities. The falling prices of oil- 44% average drop in 2014 and 29% average decrease in 2015- is potentially good for a developing country like the Philippines which is a big net-importer of oil. It means less money for more oil. Our lower-income groups and motorists also benefit from falling prices of oil. The problem however is that there are more than 2 million Overseas Filipino Workers (OFWs)  now working in Middle Eastern countries like Saudi Arabia which are dependent on oil revenues. Those OFWs are remitting more than US$2 billion annually to the Philippines.


There is an oversupply of oil in the world market. Saudi Arabia, one of the biggest producers of oil continues to increase its production while Iran is now exporting oil again to the global markets after Western sanctions against the country were lifted. The United States which previously was a big importer of Middle East oil is now producing and exporting its own oil thanks to the many companies engaged in the fracking revolution. Fracking is the process of extracting oil from shale rock. Both OPEC member-countries and non-OPEC oil producers continue to increase their production even though the prices of oil were already falling. Algeria, Nigeria, Canada, Iraq, Russia and others continue to extract and sell oil.


As the oil producers continue to increase their production, there is now a lower demand for the commodity. China’s economy, the biggest consumer of oil is slowing down. Emerging economies like Russia, Brazil and South Africa remain fragile. Japan and India, also big economies and top consumers of oil have not grown substantially. These countries’ demand for oil tends to decrease. Europe is not also growing significantly which means less demand for oil. Furthermore, the energy efficiency revolution is also contributing to lower demand of oil, e.g. fuel-efficient vehicles.


The weak demand for oil amidst overproduction and oversupply results in low and falling oil prices which have direct effects on the oil-producing economies where our OFWs work. Many of our OFWs work in oil companies in Saudi Arabia, Qatar, UAE, Kuwait and other Middle East economies. The effects of falling oil prices could be: (1) non-payment or delays in the payments of salaries and benefits of OFWs; (2) direct retrenchment of some OFWs (in both cases of company closure or restructuring); and (3) OFWs could still be employed but their existing contracts could be changed or modified with reduced salaries and lesser benefits. Those OFWs who work in other companies which are directly linked with the oil industry can also face the same problems.


What about those OFWs whose work depends on the national government budget? The case of Saudi Arabia is the most relevant to the OFWs. There are more than one million OFWs in Saudi Arabia and most of them work in government projects such as in construction and public works including the maintenance of public facilities such as existing sports complexes and others. Also, many more OFWs who are in the professions like nurses, physical therapists and other allied medical professionals are all employed by the government.


The problem is that at least 75% of the total national budget of Saudi Arabia comes from oil revenues and falling prices of oil can mean the reduction of the national budget. The government then might decide to cut the budget for some public works and social services, the very sectors where most OFWs are employed. The immediate effect of this could be non-payment or delays in the payment of wages and benefits of OFWs.  The long-term effects could be the retrenchment of some OFWs or changes in existing contracts which could be disadvantageous to the OFWs.


In light of these issues, we call on the concerned government agencies most especially DOLE, DFA, POEA and OWWA to be in full alert on the possible short and long-term drawbacks of the low and falling prices of oil on our OFWs in the Middle East. There should be constant monitoring and reporting of the actual situation on the ground most especially in Saudi Arabia, UAE and Qatar where most OFWs are employed. Those who needed and wanted to be repatriated back to the Philippines must be prioritized. Meanwhile, those OFWs who might be partially affected by the crisis and who still want to stay and work in their host countries should be given legal, financial and other forms of assistance. Lastly, we call on the government to provide relevant programs, projects and activities for the affected and returning OFWs which will be useful for themselves and their families.

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